Schaeffler Ag Ord

Ladies and gentlemen, welcome to the Sheffler AG Q2 2026 earnings call and live webcast. I am Matilde, the course call operator. I would like to remind you that all participants will be in listen-only mode and the 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 and 1 on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Heiko Eber, Head of Investor Relations. Please go ahead.

Thank you very much. Ladies and gentlemen, I'm very happy to welcome you to our today's call on Scheffler's Financial Results Q2 2026. Press release. The following presentation and our interim statement have been published today at 7.30 a.m. CET on our Investor Relations homepage. And for sure, we will provide the recording and the transcript of this webcast after the call. As usual, I'm sure that you have all taken notice of our well-known disclaimer. And also, as always, Klaus Rosenfeld, our CEO, and Christophe Hannequin, our CFO, have joined the conference call to guide you through the key information in our presentation. Afterwards, both gentlemen will be available for our Q&A session. And now, without further ado, let me hand over to our CEO, Klaus.

Thank you very much, Heiko. Ladies and gentlemen, welcome to our Q2 Q&A. Conference call. Let me start with page number three, the key messages for today. I would like to start with message number one that you already know from the ad hoc statement we had to give according to the German rules last week. We decided to update our midterm targets driven by the market environment, in particular in the US. After a solid review of a first top-down plan, you all know that we do a strategy dialogue in the summer, and as a result, we challenge clearly, intensively our outlook for the next years. and decided that on a more realistic and credible basis, the old ranges for immobility were too aggressive and that triggered this change. We have now internally given the directions for the detailed planning and that under German law constitutes an event where we decided to share that with the public. I hope you appreciate this. It created a little bit of turbulence. I understand this. But we had to follow the rules also in the best interest of our reputation with authorities and also wanted to trigger what was necessary internally to move forward with the planning cycle. So midterm targets adjusted. The key message here is we adjusted the top line, but decided based on the preliminary planning work that we would stay on group level with EBIT margin and also with our free cash flow target for 2028. That's, from my point of view, a sign of strength. and it clearly shows that the hedging logic the famous hedging logic that we explained to you several times is paying off you can also say diversification is on our side second key message results for Q2 are good results in a very challenging environment a bit margin improved while top line was more or less flat and you see in particular that two of our divisions have outperformed well VLS and BIS at the upper end of the four-year guidance. PTC comfortably within and also immobility trending towards guidance range. On immobility, all of you know that this is not a flat line across the four quarters, but the first two quarters are the ones where margin is more negative and that then changes in the second half of the year. So, I think the results show that despite no real growth in the top line, the company is improving its earnings quality. On that basis, we are also proud to say that our guidance for 2026 is confirmed. We are on track to deliver on all the metrics that are there, despite this challenging heterogeneous and fast-changing Jens Willem Schuler, Thank you very much. Thank you very much. Extended as relates to early retirement options. Most of you know that in Germany we have a specific instrument to manage restructuring and transformation that is offered with the support of the necessary agencies and governments in Germany. There's at the moment discussion that that instrument could fall away. and we have decided after considerable requests and interest inside the company from employees whether that instrument would still be available to offer that instrument again. This is already agreed with workers council and the necessary colleagues there. and that gives us another opportunity to optimize our headcount FTE across the German base. That is not only specific for one or two plants, this goes across the whole board. and we think that that will help us again to continue with our performance optimization. We'll come back to this later. At the same time I can say that the promised structural measures as of November 2024 are all in execution and we are ahead of This is also one of the drivers for the performance in BIS. Last but not least, our new growth strategy also starts to pay off. We have promising new growth opportunities. The new number that we are publishing for the first time is the order book for the humanoid business. I think we are the first ones to do that. This is, ladies and gentlemen, a conservative number. Conservative in particular because we have applied significant haircuts on the numbers that are given to us. Also with the experience that in such an environment things will need a little bit of time to Jens Willem Schuler, I cannot mention these are US names. Also the products behind this is well balanced and I can say that all of them have SOP in 2026 or at the latest in Q1 2027. So we felt that this gives you another good data point to measure success and how we are progressing and we have decided to publish changes in these order books on an ongoing basis going forward. That is my fifth key message. Let me now go quickly through the other slides so that you have time enough for questions. This is the old midterm targets that were communicated in 2025 September, as you know, just as a point of reference. And on the next page, you see what we have done. We lowered the top line from 27.29 to 24.26. That's quite significant. And the major contribution here comes from e-mobility and bearings and industrial. On the margin, we have stayed where we were, 6 to 8 on free cash flow as well. And you saw that Subsequent to the top line change in e-mobility, we lowered the EBIT margin range from above zero to minus four to zero. That's clearly for you probably a disappointment, but don't get this wrong. This doesn't mean that we give up on profitability in e-mobility. We left the zero because you can imagine that if you are in my position, while I'm rather With my 60 years now approaching the end of my career and this promise was an important one. I was not really happy about this, but I can assure you that we will do the utmost possible to bring this across the breakeven line. But we also needed to be realistic and I hope that you appreciate that. You see on the top line also a little softer bearings and industrial solutions are also a result of the environment, not so much of the Scheffler performance as such. and then you see that we have increased the guidance of the midterm target sorry for powertrain and chassis by half a percentage point and also for vehicle lifetime solutions this is exactly what I said before here you see the power of our diversified model and due to that change six to eight should be our midterm target or is our midterm target The rest is unchanged. And with that, I would go into the results. Q2, as I said, a good result. Why do I say it's a good result? Flat growth and still gross profit margin improved by a percentage point. Mid-term EBIT margin also improved by a percentage point of 4.5%. Free cash flow in the quarter still negative. Christophe will comment on this and EPS This is clearly not the end of our efforts. We want to do more. We want to continuously improve. But this sits, from my point of view, very well in our trajectory towards the year end and what we promised also for guidance. You can all read the details here and Christoph will explain them in the second part of the presentation. Let me go forward. And on the next page, you see the sales growth. I don't go into all detail, but the minus 0.3% clearly summarize a heterogeneous development across regions and divisions. You see in a region, America's 2.9% growth. You see that China was rather weak. You see Asia Pacific positive. and you see immobility plus 9.4% in such an environment that's not a bad result while the others except for Bering and industrial were slightly below the previous year quarter so all in all that is acceptable to us in particular in this environment. On the next page you see the famous one on the powertrain and I'm happy to say here in the first half of 2026, we outperformed in Beth. with 9.4% more growth than the market growth, 20.7% to 11.3%. You also have in the back of the details for the quarters, HEF was nearly there, slightly less than the market. That's clearly also a function of what's happening in the regions and ICE more or less online. So in total, in line with the market, but a positive development in BEF. and this is also exemplified by the order intake where book to bill in the best product was 1.6 times while the others were below one time. This is again pointing into the direction of why immobility is important to us and why we are confident that we can also outperform in the future. Let me go to the next page. And to all of them quickly, e-mobility here, I mentioned the key numbers and I said the ramp ups in Europe are successfully happening, also in Asia Pacific. There are here and there, and Christophe will answer these questions, the one or other one of positive effect. The order intake at the moment is a little lower than in previous years due to continued market uncertainty. But I can say with an order book that is still safely above 30 billion, I can say we have enough to do that we are not dependent on any new orders at the moment. And what I really would like to point out here is the improvement in gross profit margin. Yes, 6.9% for a second quarter is not enough to make it a true success story, but the direction is clear and this comes in particular from increased productivity. Let me go to the next one, PTC. Thank you very much. The order intake goes along, has to be understood along the same lines. There is, from my point of view, with 0.8 times, we are clearly going the right direction. Gross margin is impacted by the volume decline, also by the one or other one-off effect that comes from settlement with customers. So this is something Still to be seen against a gross profit margin of 22.4%. That's a strong margin and we are more or less able to keep that together. The highlight upstairs shows that powertrain and chassis is not only about cars, but also about trucks. And we're making good inroads in that sector at the moment when it comes to heavy duty applications. Let me go to the next page. Excuse me, that's ELS. Very strong results as you saw from the EBIT margins already. Grossmargin further improved against a top line that was not growing. Yes, we measured ourselves against car park growth slightly lower, but all in all, this business is definitely on track, and we are very happy about the underlying profitability and the earnings power that this business division has. Next page is then BIS. I also mentioned the key numbers there. Strong improvement in gross profit margin, 3.4%. Growth rather flat against the blended markets. We were not outperforming. Good order intake. We have also here an interesting mix in the regions. Positive development in the Americas. Europe is a bit softer. We see a continuously strong aerospace business. Wind is Thank you very much. and here you see the effects of our footprint activities. In particular, Sascha's business has done very well in terms of the consolidation of sites, Schweinfurt, Omburg, Bandhof, all of that is happening. And we mentioned here as well, headcount reduction of 1,650 people clearly points to the fact that our restructuring activities are starting to pay off. Next page is then On the three CEO priorities that we shared with you in the Capital Markets Day, EBIT break even, our self-help measures and the portfolio optimization, and also new growth, let me quickly go through them. On EBIT break even, I've already said on the next page, the real issue is the top line, you see it on the left. Where we are on track is our operational excellence part with a more dedicated platform approach. The idea to optimize the design to cost activities, footprint optimization and that is what you see in the R&D efficiency is addressed. We have for this program and let me stress this for this program, the completion rate of R&D right sizing is nearly 100%. and we see also a very encouraging impact that is still small but that could be increased from AI implementation in the R&D area that will improve also our time to market and then overhead costs, yes, we further need to improve on that area but we can definitely see that we are leveraging merger synergies, the targets for the overhead ratio are coming in and also here the measures are completed for this program and we have initiated on top of this a significant initiative to optimize span of control and reduce layers. All of that is certainly not fully visible in the numbers yet but it gives me confidence that Starting with a strong order book and continuing on our performance measures, we should be able to achieve our mid-term targets. Maybe slightly delayed, but with a continuous focus on sustainable, positive profit contribution. Let me go to the next page, and that's the structural measures. First half of this page says we are We are very well on track with the program that we announced in November 24. At the moment we have You can say that we have already overachieved the 4,700, so we have anticipated more interest than that number. The planned reduction in Europe is almost completed. Completed means contracts signed and then the dark green bars mean people have left the company and we expect to realize that full program with even an increased number by June, 2027, the head of plan that shows that Scheffler has with all the experience from the last years to manage these programs very effectively. And the second half of the page talks about what we put into the press. I already mentioned this. You all know that or you've heard about that the German government is discussing at the moment that this early retirement option that was seen as a very attractive instrument for managing transformation will fall away. That has triggered a range of questions in Germany. What happens to this program? Is that still something that you would offer to us? You all know that this is a program that is dedicated for people at a certain age, and it's certainly something that only works if the company and the employee gives their consent. We have decided with already approval of the Workers' Council that we would offer this again, same terms as in the existing structural measures announced in November 24. and we think that through that we can probably reduce our headcount number by 1,300 people in the next years. You clearly want to know how that impacts the P&L and the cash flow statement. The problem here is this very much depends on how people go into this program. There are various ways to structure this. You can do it with an active and passive phase where One year and one year or four year and four year. So we offer different options. And as this is very early days, we have decided not to give you a full business case here. But what we can say is that there is an immediate positive midterm or mid double digit effect in 2027. There are one of expenses and also some expenses that we can adjust in our earnings before special items. So the program as such is an intelligent, flexible instrument to drive our transformation forward that we will now use and offer according to this timeline. By end of September, we should know how many people would like to participate and we intend to finalize the implementation. That means signing all the contracts, agreeing on everything by end of November. So when we do the next budget, we should know what that means. It is, as I said, a very helpful instrument that we are now using because we were fast with approval and start the communication to employees today to manage the transition and also the transformation going forward. This is only a German program. It applies to plants and all the admin areas. So it's blue color and white color. And we have ample experience how to make that successful. Then page number three on my key CEO priorities is the new growth. I have two pages here, one on humanoids. That's clearly gaining traction. Let me show that with the three different areas here, customers. We are actively working with 45 humanoid OEMs globally. and we are increasing our strategic investments into that ecosystem on a selective basis. New York robotics was mentioned lately and also humanoid AI. We are very happy with this approach that clearly gives us a competitive edge also to others. You all know this. The product development is also something where we can report positively The number of sample orders has now increased the 50 mark for this year 2026 and we with that number we are significantly above for year 2025 and the key focus at the moment is on production ready scalability. Our foaming technology as you know is one of our key competitive advantages because it reduces production time from minutes to seconds and we can see at the moment no one really in play who can offer that ability. Delivery is certainly the most important thing and here I can say as I said before Happy to share with you for the first time an order book of 350 million by end of June. It comes from three major global humanoid OEMs in three different regions, seven different products. and the launches with the announced partnerships Neura, Humanoid and also Hexagon are not included here. The most prominent one that we are allowed to mention, you know that some customers are not allowing us to mention their names, is Xiaopeng for the RN Humanoid that is famous, as you all know, where the SOP is planned for Q4 this year. Let me mention again, there was maybe a little bit of surprise because When we were asked what's the order book, we gave you a ballpark number. That is not fully comparable here because we decided to put in significant haircuts that are done on a customer-by-customer basis because we want to be on the safe side. And as I said, as an indication here, the haircuts on the customer level are at least 50% in certain customers, even more. So we want to be safe and we will update that number on a quarterly basis. Now, next page is quickly on defense. On defense, we cannot give you an order book at the moment, but what I can say, the team that we have is completed. In startups, it is always markets, technology, and team. And here we are super happy with what's coming together. Celia is a very experienced lady from the defense industry with 25 years. Manfred is a 30-year guy for Scheffler. At the end of his career, one of our most experienced technology persons that joined here, who's already making a big difference in representing also the interfaces to Scheffler. And we have hired a top CFO externally with startup experience who starts January 1st. Very happy about this team and looking forward to what they bring to the table. You saw some of the latest smaller things, Dell Air, you saw Spire, and I can say there are numerous players and conversations that we're having at the moment, building also an order book here that we will publish when we are ready. Excuse me, let me go to the next page. And... Then I hand over to Christophe to sum it all up. You know this page. We have been disciplined in our capital allocation. Investment in Q2 was nearly 200 million, more or less on track with Q2. Reinvestment rate below one, so we are reducing capital employed at the moment. That stands at 12.1 billion. And that is, from my point of view, also necessary to bring the SVA and also our return on capital bank on track. You see where it was spent and that is very logical compared to what I said before. With that, my first part is finished and I would hand over to Christophe for the numbers. Thank you very much.