HELLA GmbH & Co. KGaA

Hello ladies and gentlemen and welcome to the Hela Investor Call on the results for the first half of fiscal year 2026. This call will be hosted by Professor Peter Laier, the CEO, and Philippe Vienney, the CFO of Hela. At this time all participants have been placed on a listen-only mode. The conference will be recorded. The floor will be open for questions following the presentation. Let me now turn the floor over to your host Peter Laier.

Hello, good evening, everybody. This is Peter Laier speaking. A warm welcome to our investor call to HeLa, half year one, 2026 results. Kerstin, if you could open the presentation and we could directly go on the agenda. I appreciate. Thank you. So we have prepared for today's call in agenda where we would like to talk at first about the achievements in first half year. followed by the financial results presented by Philippe Vienney, our CFO. And then we have a special chapter on the agenda today about lighting transformation program, which we have accelerated, followed then by the outlook for the financial year 2026. At the end then we will talk about key takeaways as usual. That let me directly step into the presentation. Let's talk at first about achievements. So in regard of achievements, we have in first half year an organic sales in HeLa, which is above market. On the other side, we are working on cost measures. And I will talk about some additional measures which we have introduced in lighting in the course of the presentation. If you look to this chart you see on the left side our organic sales growth which is at constant FX year-over-year growth by 1.6% to 4.040 million euros or above 4 billion. We have in electronics recorded sales year-over-year up by 6.6% to in total 1.685 billion Euro driven by radar business specifically and energy management. We have in our lighting VG a sales recorded year-over-year down by 3.6% to now for first half year 26 1.746 billion Euro affected by a phase-out of programs and of lower call-offs. While in the lifecycle business, these lifecycle solutions, we have an increase of sales by 5.3% year-over-year and have achieved there in the first half year 26, 516 million euro sales driven by specifically strong sales in special OE business which is commercial vehicles and off-highway business mainly. So that means in total we have reported sales year over year which is broadly flat at 3.972 billion euro. There is an FX effect in there in comparison to the constant FX sales which we have mentioned Please allow me then to move to bottom line. Let's talk about OI margin. We achieved an OI margin in first half year of 5.4%. This is specifically achieved by savings in R&D expenses where we were able to decrease the ratio by 68 basis points to now 8.9%. In addition, we have increasing cost pressure along the whole value chain and we have a strong focus on cost measures to counter this impact which we have out of the value chain. And we had in first half year a negative volume and mixed effect which weighted down our margin in first half year. If we then look to net cash flow on the right side of this chart, we recorded the net cash flow for first half year at 66 million. This compares to 114 million in half year one in financial year 25, so a decrease. and we have a net cash flow to sales ratio at 1.7% achieved in first half year in comparison to prior year same time frame 2.9%. So we have in place continued CAPEX governance and we have here achieved reductions but we have to say on the other side our net cash flow is impacted by increased restructuring cash out. That is a cash out out of the restructuring measures which we have introduced. And we have to mention that we have had in Q2 now a positive net cash development, net cash flow on 115 million versus 49 million negative in Q1. So if we go then to the next slide, Kerstin. Thank you. Let me now talk a little bit about acquisition successes in first half year 2026. As you can see in the headline, we had ambitious targets for our order intake in 2026 and we were able to fully meet those targets. But not only the value in regard of the targets we achieved, even more important is we We were able to continue our strategy of regional and customer diversification and we achieved here the related results in acquisition, which is, I think, a very positive signal. If we look a little bit to our business groups, you see here at first the highlights for electronics business, strong order intake here, specifically in our core growth products, which is confirming our strategy. So you see here three examples. On the one side we were able to acquire a large-scale high-voltage battery management system and a smart car access system and radar sensors for a US OEM with SOPs now coming in 27-28. Another example here is we have acquired a DC-DC converter order and roll out now this business at a European OEM for different models. with SOPs in 28 and 29 and a Chinese example here we were as well able to acquire a DC-DC converter and a low voltage battery management system with a Chinese tier 1 supplier with an SOP in 28. So that shows as well the broad range of acquisitions in all regions which we were able to get in first half year for electronics. If you look to lighting in the middle of the chart, there we had a strong focus on international order intake to address our premium OEMs but as well volume models. This is a strategy which we have announced before and now we are executing that successfully. You see that here for example with a headlamp package and a rear combination lamp which we acquired for Premium and mid-size models of an US OEM with SOP 2829. Another example is headlamp and combination lamp packages for European customer for the US and Asian market with SOPs in 26 and 28. Or again, a Chinese example here, headlamp projects and car and body lights, which we were able to acquire for a Chinese OEM for different models with SOPs in 26 and 27. If I then can guide your attention to lifecycle solutions on the lower part of the chart. There we continued our customer and regional diversification according our strategy. So we here examples are in acquisition we were able to acquire intelligent battery sensors for different platforms for US and European customers with SOPs in 26 and 27. And we were on the other side able to acquire customized LED headlamp and the related rear lamps for an international OEM of agricultural machinery and buses for the Indian and the European market with an SOP 27 and 28 or the third example here this time we selected to show to you is an APS for international truck joint venture this is a pedal sensor and a pedal itself for international Structure and Venture for the Asian market with the SOP in 2019. Having that said, then handing over to our CFO, Philippe Vienney, to introduce the financial results of half year one.

Thank you. Good evening to all. Looking at the sales, we published sales at 3.9 billion versus the same type of figure for last year at 3.9. Thank you very much. Thanks to Radar Energy Management and Smart Car Access. We also have a very good momentum on lifecycle solution as well with a strong special business and aftermarket. While on the other side we have a decrease and phase out of programming lighting, not compensated fully by new ramp-ups. But we will come back on that. So looking at the sales per region, Europe. Basically, it's overperforming the market by 4.6%. So here we have the effect of the electronic mainly with, again, radar and smart car access. We also have some SOPs in lighting and growing special application. On Americas, we are at minus 5.2. Here we have the end of production of several lighting programs which is impacting the US. In Asia we are 3.6% overperforming thanks to new launches in China in lighting and also with good momentum as well in electronics with strong energy management in Asia. Looking at the profitability per segment, so starting with electronics, so here we have electronics again growing in terms of sales by 6.6% on the organic standpoint, and we have an operating income at 8% at 144 million versus 121 last year at 7%. So here again we have developed a bit the cells which are basically developing well with a good momentum. And then the OI is at 8%, so here we have reduced the R&D expenses on the electronic segment. We have also made some savings on the administration and distribution expenses. On the other hand, we have a growth profit which is deteriorating because of a mixed impact with a higher material content on some new programs. Looking at lighting, so lighting is down in terms of sales on organic standpoint by 3.6% versus last year at 1.7 billion versus 1.8. Operating margin at 7 million, 0.4%, versus 63 last year at 3.4%. So here on the operating income standpoint, we are suffering from the decline in sales, close to 100 million in sales decline. We also have a decline in the gross profit as a consequence of the decline of sales, and we have some mixed effects which is also impacting our gross margin. and the FLEX which is not fully achieved in terms of fixed cost adaptation and this is also why we are going to the lighting transformation program that will be developed later on in the presentation. On the life cycle, so 515 million, so it's an organic growth of 5.3% in terms of sales. and operating income at 65 million 12.4% versus 10.6% last year. So here we have also good momentum in terms of sales in all areas, especially application, aftermarket and as well on the workshop business. And the operating income here is generated by higher growth profit and also some savings on R&D and SG&A linked to the structural improvement we have been implementing. So good momentum on the lifecycle business. When we look at the EBIT and net income, so first maybe growth profit went 21.6 versus 23.3 as a consequence of what I said Mix effect and not full flakes on the lighting performance. R&D down at 8.9% versus 9.6. SG&A down at 7.4 versus 7.6. So leading to an operating income at 5.4 versus 6% last year at 215 million. Ebit is at 169 million, 4.2% versus 138 last year at 3.5. So the main impact here is coming from less restructuring costs which have been booked in H1-26 versus the amount which was booked for a very large program announced last year in H1. And this is leading to a net income of close to 99 million, 2.5% versus 9 of 70 million last year at 1.8 percent. Looking to the cash so again the cash as mentioned was at 66 million in H1 versus 114 million last year so it's a reduction of 49 million so here we have the impact of More cash out and more payments due to restructuring, so this is linked to the P&L effect that was booked last year, but the cash out is really impacting now 26, because people are exiting now. And we have also reduced our capex, as you see on the chart on the right, with 164 million of capex versus 203 last year, so it's a reduction of 19%, so we continue to monitor and to have a stringent Thank you Philippe for introducing the financials to us.

As you have seen we have a deterioration of sales in lighting and as well a deterioration of operating income and due to that fact we have decided in the management board that we want to accelerate our lighting transformation program and how we want to do that we want to introduce to you on the next slides. Thank you. So what we are experiencing right now is that we have on the bottom line further cost pressures which are intensified in H1. We have further structural cost burden, capacity utilization in lighting is below our target and as well on the supplier side we are experiencing increasing pressure. which need to be then compensated as inflation at our customer side where we are heavily working on. But not only bottom line is affected, as mentioned as well, top line is reduced in comparison to half year one 2025. The reason is that we have still a weak European demand in the market We have an adverse customer and product mix. The EV momentum is still weaker than expected and we have acquired EV programs which are suffering. Now we have with the strong pressure in the whole automotive industry a technology differentiation now which is narrowing because there is a strong focus on costs in the whole industry. and therefore we focus actually on affordable innovations to support our customers with the right technology to give them what they need to differentiate themselves with affordable innovation in the market. All of that has led to the decision in the management board of HeLa that we want to reshape our lighting transformation program which was already started In last year we have now decided that we have or we have at first understood that the actual lighting transformation program had a focus on improving of top line to acquire again new business so that we can fill our capacities and on operations performance improvement based on the results of first half year we have clearly understood that we have to to reshape lighting transformation program and have now decided to introduce lighting transformation program 2.0 where we have a core focus on bottom line improvement as well as short-term bottom line improvement and further strengthening the top line and that will come as well with structural improvements. Basically, we do that, the reshaping of the lighting transformation program to safeguard 2026 Results, which we are striving for and then improving 27 further. We have given ourselves a clear target. You see that on the lower part of the top line here of this chart. We have given ourselves a target that we want to return to 2025 operating margin performance in 28. So that means we want to return to 3% The focus on growth and on customers already show very good results. The net The net order intake in Leipzig in half year one, 26, is two times of the order intake which we had in half year one prior year. So here really positive achievements. And this diversification topic which I mentioned before is fulfilled. You see here further figure. The net order intake has more than 75% business outside of Europe. In H1 and that clearly confirms that the strategy here is going in the right direction and we see results out of the lighting transformation program. If we look to operations, We see that on the one side we have a further increased implementation of the 4 VR excellence system which is for us a system to track and trace and improve our operations by 9 percentage points from 2025 to half year 2026 and we were able to reduce Direct and indirect headcount in our operations, direct headcount by 7%, indirect headcount by 6% versus half year one in 2025. On the cash and capital discipline, positive to be recognized is that we were able to reduce our capex by 20% versus first half year in 2025, with a strong focus on building and projects. We have a decline on net cash flow in comparison to H1 2025 and as well on the bottom line the OI decline is 89% versus the comparable H1 2025. Because of that, as I mentioned, we have decided to further reshape lighting transformation program to the 2.0 version of lighting transformation program and that you see on the right side. It's now a more comprehensive program where we have a strong focus on short mid-term bottom line improvements and we have in principle here Five different sub-programs now of lighting transformation program. We have, as you see here, if you look in the right box on the left side, we have a bottom line performance improvement program as a sub-program of lighting transformation 2.0, where we focus on operational excellence, on commercial excellence, on material cost, on cash control, as well as on the project costs and SG&A optimization. Then we have one bucket where we have enablers which we are looking on so we improve further our R&D competitiveness, hourly rates, hours used per program. We look closely to project and product management to assure that we are launching our programs with the targeted profitability rates and we are working on the The target operating model. Then we have a bucket for strategic topics where we work on specifically the turnaround of interior lighting, where we work on growth with Chinese OEMs and where we are working on a tooling and equipment strategy to get better here. And then we have a bucket for growth where we are working on our sales transformation and the related project program execution. and then we work specifically on our footprint to get here as well better so we work on a US footprint to produce in the US lighting products and we are working on our India footprint. Important to see is that lighting transformation program you see that here with a dotted line has a lot of buckets with a strong focus on bottom line and how we are doing that a little bit more in detail you see on the The next slide. So we work strongly on those buckets and you see here always two examples now what we are doing concretely in those Those areas that you get an impression how we really strengthened the program and have implemented a clear governance and execution system with related structured drum beats and steering, close financial tracking, assure that we only really have qualified P&L effects that have a close control of the program. If you look to the different buckets, We work on operational excellence specifically on workforce and overhead targets which we have clearly defined for year end 26 and then as well for 2027 what we want to achieve and we have an implementation program where we are looking to the degree of achievement and with that then monitor that closely. We have for all plans defined OEE and NQC targets so OEE is overall equipment effectiveness that means how good you are using your installed equipment and NQC is a non-quality cost so money which we are spending for quality topics and we work on scrap and with that we have we have clearly defined targets to achieve that until year end as well commercial excellence we have clearly defined claim targets which we want to recover in 26 at our customer base and the same is valid for engineering change requests so that changes which are required by the customer where we have a clear tracking and then ask as well our customers to pay for those changes and we have a clear loss making project management now established. On the material cost side we have clearly defined targets for reduction in 26 and we have For the AVE, which is value analysis and value engineering, that means optimization designed to cost on our own products, which we have brought now on track where we will see specifically in 27 results on the R&D competitiveness side. We are working now on rightsizing on the one side with best cost shifts and on the other side with consequent deployment of AI and all the opportunities which you can gain out of that. and we work on bill of material, so that means the materials which are contributing to product cost improvement via design. On the project and product management, we have on the one side a clear management of our SKU stock keeping units where we have clearly targets defined and we want to reduce complexity. and we have a platform governance that means we want to assure that we consequently use our platform designs in the future and that create the economies of scale. We have a gatekeeper installed so that we assure that nothing is flowing through. On the cash side, I talked already about our capex targets which we consequently managed that went as well okay in first half year but we have here still further to focus on and we have now introduced as well as tricked working capital management so that means specifically inventories but as well receivables and payables which we are managing consequently have strong focus on that and then if you look to net project costs we have clearly defined reduction targets here and we have a design to cost discipline which we are enforcing and requiring and on the SG&A side we have introduced now a We have a focused benchmarking for lighting where we have a good database right now based on consultants and we'll use that as a base to consequently act on SG&A and for sure we will as well in SG&A use consequent AI deployments to improve. So while we have shown all of that to you, this is a very comprehensive program. I personally have used such a methodology successfully before with proven results and we will introduce that now in the, or we have already introduced that in the lighting business to achieve the results which we need for improvement second half year in 26 and 27 and beyond. So with that I would come to the outlook, Kerstin. So if we look to outlook financial year 2026, we see here at first our prediction on further market development. We see a declining market in 2026 and we see that the headwinds even are expected to increase In second half year, specifically driven by China. So that gives us a perspective on the expected global light vehicle production for 2026 on a level of 91.1 million vehicles. You see here in smaller figures, first half year 44.8. The expected deterioration of the market in comparison to 2025 will happen in all markets. America and Europe slightly down with 0.7% and 0.9%. A stronger reduction in Asia Pacific by minus 2.9%. That is specifically driven by the expected reduction in China in half year two. If you go then to the next slide. Despite this market outlook, We are confirming our outlook, our guidance. So that means we still see ourselves ending the year in regard of sales between around 7.4 to 7.9 billion Euro. We are seeing ourselves closing the year 26 on an OI margin between around 5.4 to 6% of sales. and we are seeing ourselves closing our books for 2026 with a net cash flow at at least 1.8% of sales. For sure, all of those figures are still based on the related light vehicle production forecast which I have shown on the slide before with 91.1 million vehicles. With that, I would like to come to the key takeaways. Let me summarize in this way. Half year one, sales deployment was as expected. Sales at constant FX growing by 1.6% to around about 4 billion, outperforming global light vehicle production by 250 basis points. That's great news, I think. The growth was driven by electronics and lifecycle solutions. Our profitability suffered from volume and mix effects. And we have acceleration of cost reduction to counter the inflationary pressure which we have. We have a good CAPEX governance installed which has continued and the net cash flow reduced to 66 million was impacted by the restructuring cash out. The outlook, you see that in the middle for 2026 we have confirmed, so 7.4 to 7.9 billion roundabout sales. OI margin between around 5.4 to 6% and net cash flow to sales at least 1.8%. The outlook is based, as mentioned, on The actual forecast of light vehicle production of 91.1 million. We expect for the second half year increasing headwinds from the market, specifically in China, with light vehicle production down by 4.1%. And we expect further headwinds in raw materials, for example PCBs or semiconductors, which we consequently have to address at the customer base. Specific focus for us is actually the lighting transformation program 2.0 as introduced. So we have a strong focus on bottom line improvement now in lighting transformation 2.0 with a focus on short and midterm improvements. We have a clear intention to improve the performance through the introduced eight buckets based on validated impacts on P&L and cash flow and a very close tracking of it and we have a regionally diversified acquisition focus in volume and in premium segment in lighting with a platform approach which is very important to create the economies of scale and with a strong focus on affordable innovations to serve our customer needs and further step into the volume segment. With this we are through with our presentation and now operator let's open for questions.

Thank you. Ladies and gentlemen, if you would like to ask a question, please press star 9 and the pound key on your telephone keypad. If you would like to revoke your question, press star 3 and the pound key. You can also use the dial-in function in the webcast and raise your hand if you would like to ask a question by phone. The first question is from Mr. Krzysztof Laskawi from Deutsche Bank. Please go ahead. The floor is yours.

Good evening, thank you for taking my questions. The first one actually on lighting. Last Friday VW revealed part of the 2030 strategy and within that actually announced to reduce the component variety of some components significantly. So, front lights are seen to be cut by around 60%. I was wondering if you could comment potentially on how that changes the competitive environment in your view, especially in Europe, when we think about peers, direct peers that are trying to fix and grow the business in lighting too. Would you think that if we assume volume overall is not Would you think this is increasing the competitiveness in the RFQs or is posing some risk? Second, on the current trading, electronics was quite strong in Q2. Could you comment on how that is trending into H2 and overall call-offs at the start of Q3?

Yes, first in regard of your question regarding Volkswagen strategy and lighting, Christoph, I would like to answer in this way. Yes, this is a trend which we are seeing in some OEMs as well in Volkswagen to reduce varieties in the segment and for us this is from my point of view a chance. Why is that? Now consequently introduce our platform strategy, our modular strategy and based on that we have the right toolbox to quote in regard of this reduced complexity and variety. So I think that will help us to play to our strengths with our platform approach and therefore I think that that will help us. We are looking very much forward to that and we are in close exchange with our customers as well as the mentioned customer to leverage on that and I think as well the acquisition success which you have seen in first half year is confirming that we are doing things right in that regard. In regard of electronics, Your question was after a strong first half year, 26, how is second half year developing? We see a continuation of this development in second half year and think with our strong portfolio that we have as well in the future very good opportunities.

Thank you. And just a general comment on the call-offs of the customers starting Q3?

Forecasts are basically somehow stable depending on the market. I talked about China. China is expected to get reduced by 4.1%, as I mentioned. But in principle, call-offs are okay. We are actually in summer phase. You know that traditionally July and August are lower. But what we are seeing in our systems, September, October will again come back. So some headwinds from the market. There is no growth to be expected. But the call-offs are stable except China where we see a reduction by more than 4%.

Thank you.

You're welcome. Thank you. Further questions, please.

So at the moment there seem to be no further questions. I will just repeat if you want to ask a question please press star 9 and the pound key on your telephone keypad and if you'd like to revoke it press star 3 and the pound key.

Okay so if there are no further questions. Operator seems not the case huh?

No.

Okay. Good. Then I would like to thank all of you for your attention and wish you all the best. Thank you for listening. Bye bye. Good evening.