HELLA GmbH & Co. KGaA

Good morning and welcome to the Hella Investor Call on the results for the nine months of fiscal year 2025. This call will be hosted by Bernhard Schäfer-Barthold, the CEO, and Philipp Viennet, the CFO of Hella. At this time, all participants have been placed in a listen-only mode. The floor will be open for questions following the presentation. Let me now turn the floor over to your host, Bernhard Schäfer-Barthold. Please go ahead.

good morning to everybody very warm welcome to our nine-month result call and I'm here together with Philippe Vinet our CFO and Kathleen Doodle our head of IR so starting off the presentation on page four so if we look at our sales development we are end of September in line with what we expected. So positively, our electronics business is continuing to grow. We had a growth now in the first nine months of 8.3%, specifically our radar business, but as well our business in our product center, energy management, is continuing to grow. On the lighting side, we are not growing, so we are down 8.4%. We mentioned also earlier, mid of the year, that the end of some larger projects, but also the reduction on volumes on some programs in our order book is the reason for that, and I will come back to that and actions we have now taken for lighting. On lifecycle solutions, our business is still down in the nine months, but positively we have now seen in the third quarter that we are back to growth. We had quite a decent development in that segment in Q3. So overall, Sales is quite stable, FX adjusted, so a slight growth of 0.4%. And considering or looking at reported sales, we are at minus 1.1, considering the strong FX headwind we had. On our operating income margin, we are at 5.8% in the first nine months. Overall, I can state we continue to have a strong cost discipline. We are implementing the structural programs we have initiated in the last two years. considering the environment, we are in line what we planned also in our budget. Net cash flow has improved on a year-on-year comparison is at 68 million to the end of the year, 1.2%. We have reduced CAPEX and within that number, If we look at factoring, the increase in factoring is at 23 million in comparison to last year, 30 million less. If we move on to the order intake, we are good on track. The third quarter was again a good quarter in terms of order intake. um we had a strong momentum especially in the in the lighting business two areas where we wanted to grow more broadly in the us and also in asia and specifically china we could win important programs but as well in europe we were quite successful we are now attacking the market as well in in the mass market, so in the volume markets, and we were able to win significant program volumes for the European regions in the third quarter. On the electronic side, we continue to be very successful. So we are highlighting here some of the programs that what i can state overall that within our electronics business we continue on a on the strong growth path and this should also support our growth trajectory in the in the upcoming years and to finish off our life cycle was also quite successful in the last in the last month we are highlighting here some of the programs so bus agriculture remains remains important business areas and customer segments for us to continue to grow and as well here also to highlight, to get broader in terms of our market reach. So we're happy to win also projects outside of Europe and to gain market shares there as well. um overall we are on track in terms of our order intake achievements um after uh after nine months going to page six um some highlights uh so on the on on the lighting side we continue to see that um we are differentiating with our lighting technologies we are present um also in uh on the different shows and fairs. Here we are highlighting one, and we are advertising and showing our news technologies also to the different customers. I think from my perspective, feedbacks are quite good. We are getting, so this should support our growth we are envisaging in the upcoming years. And the electronics, one important milestone now we had is the launch of our IPDM, so of our eFuse technology in one large platform. We are engaging ourselves much stronger now into the whole Sonal architecture of the car and this technology. which manages the power in the car and which is embedded in the solar architecture and in the new EE architecture overall of the car is a big milestone for us. And this is one very important technology we envisage will give a strong growth potential in the upcoming years. And this is why we are highlighting it here in a strong way. The other thing I want to mention is on the structural changes. So I mentioned we continue to reduce our cost base. In the last month, we announced the structural change in one of our plants in Germany, which now we are going into execution. um, other than that, we are now in execution in terms of our new simplify, um, program. So this is a global program where we are reducing in all, uh, white color functions in the upcoming three years around 15%, um, on, um, on, on head counts. And, uh, so we are well on track. We already, um, started on that program, the target is to be at least at 20 percent of reduction to the end of this year and around 50 percent on the reduction to the end of next year. And I can say that we are ahead of the target as of today, and we are trying to accelerate on that as well. And you can see that as well in the headcount development. If you only look at the last nine months, we have already reduced close to 5% on headcounts as of today, in comparison to the start to the year at a quite comparable sales level, and we will continue on these adaptions. If we move to page 7, let's say one of the big challenges we are facing actually is the crisis on the shortage on Nexperia. So it's clear that if we look at our portfolio of products, we have a lot of Nexperia parts in our products. So in general, I can say we are strongly impacted So we have organized our way, us in a way also with task forces and are managing the situation in the way that we're building up the alternative suppliers. And in the meantime, for sure, we use, we still use Nixperia parts. So our relationship today with Nixperia China is still stable and we also managed to to buy broker parts which in the meantime supports our our supply so far I can say that the month of October was was in line with our plan so there was there was little impact the start into the month of November showed a little more impact in terms of the full coverage against the plan. And the most difficult weeks now from our side will now be the next ones, where in the meantime, where before being able really to ramp up the second sources, we are seeing some of the shortages. So we are working intensively also on the application on export licenses. and also taking advantage and the support also on the OEM side, which are going for these applications as well. So this could help to support also on parts we have in China who could be exported to the US and Europe and help there on the shortages so far. um china for us is is not impacted we have uh we have enough parts um so this is something difficult to quantify over um overall but as i said so far the impact was was very limited and we have now to see how next weeks will be and specifically if um with uh on the chinese authorities the customs and moscom we are able now to get the necessary applications to do the exports to support europe um and the us as i um as i said but as you can imagine a lot of um intensive work we are doing and managing the situation to keep our delivery promises to to to the customers So, having said that, we will move on with some more details on the financial results. Philippe will take over.

Yeah. So, good morning to all. So, looking at the sales, so we are publishing sales at $5,868,000. Euro, so which is representing a decrease of 1.1 percent versus prior year, and excluding the exchange rate, this would be at the plus 0.4 percent versus last year. And versus the market, which is showing a growth of 3.8 percent. So here again, as I said, we have a good momentum in all regions on electronics, whereas we are suffering on the lighting side with lower cells, which are affected by end of production on some programs, mainly in North America and Asia. And the lifecycle is showing reducing cells, but we are also seeing a good momentum in Q3 with some slight recovery. So looking at the sales per region and versus the market, so Europe, where we still have more or less 56% of our sales, we have a growth of 1% versus the market, which is showing a decrease of 1.7%. So we are overperforming versus the market for Europe. For America, where we have sales which are above the 20 percent of our sales, we are seeing a decrease of our sales of 1.1 percent, slightly impacted as well by the FX impact. That's with the market, which is reducing by 0.5 percent. So, here also we have, again, the impact of lighting, where we have this impact of some end-of-production series, which are not fully compensated by new launches. And we have Asia, which is also a bit above 20 percent of our sales, where we have a decrease on our published sales of 6.4 percent, also slightly impacted by the FX, versus a growth in this region of 7.2. So, here again, we have the same topic on end of production of service project in lighting, but not fully compensated by new cells and new launches with local OEMs in Asia. And we still have, again, growth momentum in China on the electronics with radar and battery management. So now we're looking at the profitability per segment. So lighting, we are at 2.7 billion of sales, which is representing an organic decrease of 7.3%, excluding the exchange rate. So here, I said again, we have the impact of end of pollution of some series projects in China and North America. We have some increase on the headlamps and rear combination lamps in Europe and America, which are not enough to compensate the drop that we are experiencing. seen in Asia and North America on the rundown programs. So the operating income for lighting is at 73 million euro, or 2.7%. So here we are impacted by the volume drop, which is clearly impacting the gross margin and the operating margin. which we are partially compensating by lower material cost, also some reduced R&D cost and SG&A cost, but not enough to compensate the volume drop that we are facing, where we still have to reduce and continue to reduce our fixed cost to absorb this and face this volume drop. So, we are publishing cells of 2.5 billion or 2.6 billion, which is representing a plus 9.5 percent excluding FX rates on the organic basis. So here again we have growth in all regions and growth thanks to the radar business. We have also growth in the car access system in Europe and Asia. And we have also some growth thanks to the battery management system as well in Asia. So, good momentum on the sales in electronic. And this is leading us to an operating income of 196 million, or 7.6% of operating margin. So here we have the benefit of the volume, which is helping the gross margin and the operating margin. And we have been able to be stable on the R&D spent, and also thanks to a reduction of external spent and external provider. And we have also been able to maintain or even reduce the LG&A percentage in this segment. So, all in all, leading to the 7.6% of operating margins. Life cycle, where we have sales of $739 million, which is representing a decrease of 1.5%, excluding a fixed rate. So as we said, we have a low demand, especially coming from the H1, and especially on the commercial business vehicles. But we see some recovery, slight recovery in Q3. So especially also on the commercial business, with some stable business on the aftermarket. And this is leading us to an operating income of $74 million, or 10%. So here we are impacted also slightly by the volume. And we have been able to maintain or even decrease the R&D expense with SG&A, which are slightly increasing mainly due to distribution costs. Profit and loss for ELA, yes. So we have a gross profit of 1.3 billion, which is 22.8% versus 23.2% last year. So here we have the weight of the volume decrease in lighting and life cycle, which is impacting us and not fully compensated by the improvement on the electronic segment. On the R&D side, we are at 9.4% versus 9.8% last year. So here we continue to see the benefits of our adjustment and structural adjustment on the R&D side and the cut on the external provider, as I mentioned, for electronic. On the SG&A, we are at 7.7 percent. So, here we see a decrease on the administration cost, where we have a slight increase on the distribution cost. So, I think the good trend is the administration cost, which are decreasing and showing some effect of the program, which has been launched to reduce this cost. On the earning before tax, so we are reaching $208 million versus $409 million last year. So, here we have the negative impact of all the restructuring programs which are booked and are part of the $129 million. to mention that last year we also had some but which were more than compensated by the sales of the BHTC business and the net gain that was booked last year. And this is leading us to a net income of 108 million versus 310 last year. On the net cash flow, We are at 68 million versus minus 8 million for the same period last year. So here we are increasing our net cash flow. So we have higher cash from operations. We are also having a good momentum on the working capital with some negotiated and good payment terms with suppliers. And we are also reducing our tangible capex. You can see that we are at minus 23% versus what was cashed out last year and spent last year for the same period. So this is benefiting to our cash flow, leading us to have a $68 million cash flow for the first month of the year. With that, I think we are finishing the financial details, and we can go to the outlook.