Schaeffler Ag Ord

Good morning, ladies and gentlemen, and welcome to Scheffler Group Q2 2025 Earning Conference Call and Live Webcast. My name is Yousef, the course call operator. I would like to remind you that all participants will be in listen-only mode and that this conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star followed by 1 on your telephone. For operator assistance, please press star and then 0. The conference will not be recorded for publication or for broadcast. At this time, it's my pleasure to hand over to Heiko Eber, Head of Investor Relations. Please go ahead, sir.

Thank you very much. Ladies and gentlemen, I'm very happy to welcome you to our today's call on the financial results Q2 2025. The press release, the following presentation and our interim statement have been published today at 8 a.m. Central European Time on our Investor Relations homepage. And for sure, we will provide the recording and the transcript of this webcast after the call. As a quick reminder, Please note that all figures for 2024 are pro forma figures, unless they are marked separately as reported figures, and the mentioned pro forma figures 2024 and related information are unaudited. As always, Klaus Rosenfeld, our CEO, and for the last time today, Klaus Bauer, our CFO, have joined the conference call to guide you through the key information in our presentation. Afterwards, those gentlemen will be available for our Q&A session. And now, without further ado, let me hand over to our CEO.

Michael, thank you very much. Ladies and gentlemen, welcome to our Q2 call, you have the presentation in front of you and I would, as usual, start with section one and two and then hand over to Klaus for the financial performance. If you follow me on page four, you have the summary for Q2. It's a solid quarter in a challenging environment for sure. Sales were slightly down compared to Q2 2024, minus 2.2%. Gross margin more or less on the same level like performer Q2. Avid margin slightly below 3.9 of the previous year quarter with 3.5. Clearly impacted by FX impacts and also by impact from tariffs that were both not part of our guidance. And then on the positive, free cash flow in the quarter, plus 27 million, slightly better than expected, for sure better than Q2 2024. That also had this well-known one-off BTESCO payment effect that was related to contract manufacturing business. And then for the first half EPS, slightly positive. Now let me go into detail with the top line. As you all know, we publish in the business performance those parts that I look at from a CEO perspective to follow the business. And what you see on page number six is the breakdown in terms of sales. I think it's fair to say that this is a heterogeneous development across the various divisions and regions. with some peculiar things to mention. You see that immobility was up nearly 10%. We are really happy with that. That's the right direction. And I will come back to order intake and other achievements there. You also see when you go into the immobility column that Europe was 9.5% up, America's 31% up. And then you see a drop in China and a significant growth in Asia Pacific. To some extent, you need to see that together because we have a significant ramp up in a platform that is located in Asia Pacific that was located in China before, and that clearly impacts the minus 21%. Powertrain and chassis down, in particular down in Europe, nothing that should be completely surprising. as the market is developing lifetime solutions, not a two-digit growth quarter this time. You know that the business is predominantly in Europe and in the Americas, so there we didn't see the growth rate from the past, but still it's our business with the highest margin and profit contribution. And then bearings industrial, also a pretty mixed picture. You see the 10% up in China. This is predominantly driven by wind business that was booming there. Therefore, our decision to stay the course despite the competition there was exactly right. Minus 0.5% is certainly not what we would like to see over time, but it's, in this environment, from our point of view, an acceptable result. What you also see is, again, the logic of the three hedges and that helps us to build resilience and also the right basis for future growth in selected areas. Let me go to page number seven. That's the page that we introduced in Q1. That's, for me, one of the most important ones where we basically map together the auto powertrain businesses. across the two EMOP and PTC divisions. This is here without chassis, and it's comparing our sales growth in the specific powertrain types, BEV, HEV, ICE against market growth coming from the S&P data. And what you see here on the left-hand side is that we are able to outgrow the BEV market, market growth in that first half. was 37.7% and our sales growth in the first half compared to 24. The first half was 50.6%, so nearly 13% outperformance on the positive. You see in half, there's an underperformance and also an ICE. We did not achieve the market growth. You need to put that together with the right-hand side of the page, order intake and book-to-bill by powertrain type. There you see order intake now in the first half, 8.4 billion, of which more than half comes from e-mobility. Division, 3 billion in the first quarter, 1.6 in the second quarter. If you break it down by powertrain type, you see that the predominant order intake is with half, 2.6 times book to bill. clearly points to future growth in that powertrain area. I hope that is useful to you. We use it to manage the transformation here, and we think that this clearly is a proof that the Vitesco acquisition was exactly the right thing to do. Page number eight, eMobility, strong sales growth and further gross margin improvement. With the margin that you will see later on, We are definitely on track to achieve what we want to achieve, and I already mentioned order intake and also book-to-bill. On the little picture on the right-hand side, you see one order intake that we're really proud of, and that's a new contract. We can't mention the name, but it's one of the Chinese new energy vehicle players that we signed in July, so it's not already in the order intake. but it's for us a significant step forward to improve our competitiveness and presence with Chinese NEV players. So e-mobility, definitely on the positive side, strong sales growth, gross margin improvement, and really very solid order intake. On the BTC side, sales growth minus 7.3, order intake 1.9, book to bill, certainly below one. That should not be a surprise. And gross margin more or less stable. Yes, we are certainly also impacted by certain phase-outs and the negative impacts that we have there. Don't forget, powertrain and chassis includes also some of the businesses that we are running down and that has impact on the results. Here to mention from the business side, we are proud for a significant order in the passenger car sector for a diesel ECU, so also that part of the business is alive, and we secured a long-term contract here in the U.S. for that transaction. Let's go to VLS. As I said, slightly less positive than in the past two quarters, but certainly future growth against a very strong Q2 24. the high gross margin level maintained with more than 30%. And for sure, not every quarter is a record quarter. We're investing now in a new logistics center and are positive that that will help us to facilitate further growth and logistic efficiency in Europe. Then bearing in industrial solutions, you all remember that Q1 was a record quarter also with some Operational one-off effects from inventory valuation that can clearly not be topped in a second quarter. Sales more or less flattish. Outperformance a little bit below where it should be. Book-to-bill here is different than in the more passenger car-related businesses. But what I can say on the positive is that gross margin improved by 1.2 percentage points. In a situation where sales do not grow, that tells you that the health indicator of the business is pointing in the right direction. And that includes a negative also from effect that is overcompensated by other positive impacts, in particular on production cost. So let me lead over to the page number 12 and start with cost. For sure, cost management will continue to be very important and I can say here, although this is not on the page that our program to achieve synergies but also to bring forward our transformation program is very well on track and we will hopefully in the rest of this year conclude all the negotiations with workers council in a very efficient manner and then continue to execute but we are ahead of target here and see that we can manage this further restructuring without too much noise also compared to others. What is even more important to me is capital allocation, as you all know. Most of you remember our capital allocation scheme. After the acquisition of BTESCO, we have certainly two aspects here. We have complexity that we need to bring down, but we also have a significant portion of capital employed that we don't really utilize as much as we should be. And that means we need to very much be disciplined on how we put capital at work and reduce our capital employed. And that's what you see on this slide. 205 million CapEx in a quarter is low. It's a reinvestment rate of 0.6 times. And if all of you understand that concept, it means nothing else that we are reducing our capital employed. That's what you see on the lower part of the chart. The $13 billion that we had end of the year, end of the first quarter, 25, has been reduced to 12.5. And you see it on the right-hand side. This is working for more or less all the divisions. PTC contributed with 200. Barings contributed with 150. BLS is flat. And also, e-mobility has a slight reduction there. You may ask, why is that happening? Are you not investing in e-mob? For sure we are investing. You see CapEx reinvestment rate above 1, 87 million investment. But for capital employed, also working capital management is key. And that's the reason why e-mobility is down significantly. because there the change in working capital, together with the depreciation, overcompensated the $87 million investment into that business. So please take with you optimizing our capital employees, being very disciplined with capital allocation, managing the portfolio in a very disciplined manner, straightforward. It's absolutely key for our execution programs. Let me finish my part with one slide that you have not seen so far, and I don't want to go in too much detail, but I want to share with you how we monitor integration. We're doing it with the three lenses that you see on this page. We are monitoring progress. That's basically completing tasks by milestone, and we can say we are definitely on track with 60%. achieved by end of July. We are also managing a specific program to reduce complexity. Six key indicators, legal entity integration, IT system integration, processes, brand, footprint, and reporting. You see here that we have set up a three-year program with 27 targets, targets for 2027. The progress is tracked on a regular basis. And this part here, number two, is not just for the fun of it. It's ultimately linked to our board compensation. So if we achieve the targets here, it's 100. If we overachieve, it's 120%. And if we underachieve, it's a penalty of minus 20%. I can tell you, I've not seen something similar so far, but this complexity reduction program is really getting a lot of traction, and people are working very hard to get that achieved or overachieved in synergies. You see here it's also a long-term program. We promised 600 million fully realized in 2029, and here we are around 12%, so that is also absolutely on track. Synergies are not tracked in a way that you can sort of detail by category where this goes into the P&L. We're basically tracking it by looking at all the measures that are in place because the P&L tracking for synergies is normally not really possible. One of the things that make a difference is rebranding. I'm not going to speak too long about this. But I wanted to leave you with a little bit of insight that our integration execution is on good progress and that synergy realization is on track. I now hand over, unfortunately for the last time, to my dear friend Klaus with D for the financial performance. Thank you very much.