Hella Aktie

Good morning, ladies and gentlemen, and welcome to the HELLA Investor Call on the Results for the First Quarter of Fiscal Year 2026. This call will be hosted by Professor Peter Laier, the CEO; and Philippe Vienney, the CFO of HELLA. [Operator Instructions]

Let me now turn the floor over to your host, Peter Laier.

Thank you very much, and good morning to everybody and a warm welcome to our Q1 Investor Call. And we have prepared as usual short agenda for today's call. I would like to talk at first about our achievements in Q1 followed by the financial results. Then we will talk about the financial outlook of 2026 again. And at the end, we will summarize with key takeaways. And after that, we are for sure open and happy to take your questions.

Next slide. Let me talk about achievements at first. You see here, sales in first quarter is somehow flat. We have increase of cost measures to safeguard our profitability.

If you look a little bit to the sales at first more in detail. As I mentioned, at constant FX sales is year-over-year, nearly flat with a slight increase by 0.2%. We achieved an absolute figure of EUR 2.001 million (sic) [ EUR 2.001 billion ] sales.

If you look a little bit more to the details of sales, you see that Electronics sales year-over-year increased by 6.8% to EUR 832 million, mainly driven by radar and energy management business.

In the Lighting business group, we have the opposite development year-over-year. We have a decrease of sales of 7.7%, and we achieved there EUR 834 million, mainly affected by a phaseout of programs and as well lower call-offs.

In our third business group, Lifecycle Solutions sales was up by 5.6% in first quarter. We achieved EUR 260 million sales driven by strong Special OE business, specifically where the market is continued to recover.

Overall, if we look to reported sales, we are year-over-year down by 2.9% and achieved here an absolute figure of EUR 1.939 million. (sic) [ EUR 1.939 billion. ]

If you look then to OI margin, we closed the first quarter on a level of 5%, mainly due to influences -- negative influences of Lighting. We will talk about that in a second more in detail in Philippe's presentation. We continue with persistent savings in R&D expenses, and that has been the result that the ratio is down by around 130 bps to 9.2%. And we see positive effects of cost reduction measures further, and those are offsetting the negative volume and mix effects.

If you look to net cash flow. Net cash flow is better than the comparable Q1 in financial year 2025. We achieved a net cash flow of minus EUR 49 million in Q1 '26 versus minus EUR 61 million in Q1 '25. Net cash flow sales ratio is at minus 2.5% as well better than prior year where we were at minus 3%. And for sure, we have to consider here the usual seasonality. Net cash flow is continuously impacted by restructuring cash out, and we have a strong governance for CapEx implemented, which we have as well continued in Q1 and which we will continue.

If we look a little bit more to the business details, you see here that the order intake in Q1 is well on track. We work on our, several times mentioned, further diversification of our business with respect to regions and segments.

If you look a little bit to our business groups, you see in Electronics that we had in Q1, a strong order intake in our core growth products. You see here 3 examples: Battery Management System and car access order from a European OEM for the Chinese and European market with start-up production in '27. You see here DC/DC converter roll-out business for premium OEM for the Chinese market with SOP already in '26. And you see here large-scale High-Voltage Battery Management System order from a U.S. OEM for an SOP in 2028.

If you look to Lighting business group, we have here a focus on international order intake with premium OEMs as well as volume models, so as well following our strategy. As well here 3 examples: Headlamp package for midsize and premium models for U.S. OEM with SOP in '28 and '29. We have headlamp package for a European OEM for the U.S. market with the SOP in '28, and we have headlamp and car body light order for a European customer for the Asian market with an SOP in 2026.

Last but not least, to talk about Lifecycle Solutions as well here, the customer and regional diversification continued, which is, I think, as well as execution of our announced strategy. So here 2 examples to be talked about: first, a customized LED lamps and intelligent battery sensors for an international manufacturer of agriculture machinery for the India market, SOP 2027 or significant step for us, an accelerator pedal sensor for an international truck joint venture for the Asian market with SOP in 2029.

Yes. With this overview of the order intake, I will hand over to Philippe Vienney to talk about financial results. Please, Philippe.

Thank you, Peter. So, good morning. So in terms of sales, yes, the reported sales, as said, were at EUR 1.939 billion. So it's a decrease of 2.9% on reported sales. But the sales are impacted by FX by EUR 62 million negative impact. And then the growth is -- organic growth is at plus EUR 4 million, so it's plus 0.2% versus the market, which is down by 3.4%. So we are overperforming the market in terms of sales, basically due to the good momentum on Electronics as it was said, and Life Solutions business as well, while Lighting is showing some decreased sales with phase-out program which is impacting Europe mainly and North America.

Now looking at the performance at constant rate versus the market. So Europe is above plus 0.9%. Here, we have some successful launches of radar and as well the effect of special operation in Europe. North America is down by 1.3% here. So we have the Lighting business, which is impacted by program going down, but not fully offset by new ramp-ups.

And we have Asia Pacific, where we are at plus 8.4% versus a market at minus 4.9% -- or plus 3.5%, sorry, versus the market of 4.9%, so outperform the market of 8.4%. And here, it's mainly coming from Electronic as well, but mostly Lighting where we have the full effect of the new program and the ramp up versus last year Q1.

Now looking at the segments. So if we start with Electronics. So here, we continue, as we said, with the sales momentum, which is pretty good and growth. So year-on-year sales at 6.8% increase at constant exchange rates, so at EUR 832 million. Operating margin at EUR 59 million. So it's 6.6% versus 6% last year. So operating margin is basically driven by a bit of volume, but also much lower R&D expenses, which is positive for the operating income and saving as well on the administration and distribution expenses, which is leading to this improvement in operating margin.

Lighting. So in terms of sales is down minus 7.7%, again at constant exchange rate, which is mainly, as I said, due to North America, which is down and also impacted by FX impact. Whereas in Asia and China, we are performing relatively well in terms of sales versus the market. But all-in-all, it's a decrease. So it's close to EUR 100 million of sales decrease, which has obviously a drastic volume impact on the bottom line. So we are having an operating margin of EUR 1 million for Lighting versus EUR 31 million last year. So mostly impacted again by the volume. And despite reduction in R&D and SG&A, that was obviously directly impacted by volumes, so not enough to be at the year of last year -- at the level of last year.

Going to Lifecycle, Lifecycle is also showing a growth in terms of sales, 5.6% at EUR 260 million, with an operating margin at EUR 35 million, 13.4% versus 10.8% last year. So here, we continue to benefit in terms of volume of the rebound on the Agriculture segment and Construction Machinery, which was foreseen at the end of last year. The momentum is continuing. That's pretty good for the volume.

And the profit margin -- operating margin, so at 13.4%, basically benefiting from this volume impact and also savings on the SG&A with the cost measures, which have been implemented already last year.

Looking at the full P&L and the net results. So here, we have an increase of the earning before tax and interest, and we have an increase of the net income. So here, we have -- we are reaching EUR 32 million of net income versus EUR 24 million more or less last year, so 1.7%. So here, we have the benefit of having less or lower restructuring costs than last year due to seasonality and program announcement according to the booking rules. So this is favorable for Q1 '26, leading to this plus the savings we are generating on the R&D going from 10.4% to 9.2% and also saving on SG&A going from 7.4% to 7.2%. So all this is contributing to this positive EBIT versus last year.

In terms of cash flow, so we are at minus EUR 49 million of net cash flow versus minus EUR 61 million last year. So slightly better than last year. And this is also basically achieved, thanks to this strong governance we have on the CapEx. You can see on the right, where we have spent EUR 82 million of CapEx versus EUR 135 million last year. On the other side, we have more restructuring costs in our cash in Q1 by more or less EUR 30 million versus what we had in our Q1 '25 as a cash out. So this is in a nutshell, the financials.

So now we can look at the, what is coming in front of us and the outlook for '26 with Peter.

Yes. Thank you very much, Philippe. Yes, let's talk briefly about the outlook for 2026. You see here, as usually, we base our forecast for light vehicle production based on S&P Global Mobility. And you see here that we are expecting now based on the April figures of S&P, a reduction of the global light vehicle production market by 1.8% down to 91.4 million vehicles expected right now. That is for sure, mainly impacted by the actual Iran war and related influence on the markets.

If you look to the distribution of the markets, you see that half year 1, we are expecting at 44 million, while half year 2, we are expecting at 47.4 million, so a little bit better than first half year expectation for half year 2. This actual declining of the light vehicle production in comparison to last year is basically valid for all major regions. So you see the Americas down by 1.3%, Europe down by 1.8% and Asia Pacific by 2% down. So all major markets are negatively influenced by the actual situation.

Next slide. Yes. Despite that, we are confirming our outlook for 2026. You see that here on this chart, we are confirming our sales will be between around EUR 7.4 billion to EUR 7.9 billion this year; the OI margin, which been around 5.4% to 6% of sales; and the net cash flow at, at least, 1.8% of sales. For sure, this is based on the actual S&P forecast of light vehicle production if we would experience a further political or economic significant deviations that is then subject to further investigation of our outlook, but based on the actual boundary conditions, we confirm the figures as you see them over here.

Next chart? Yes. That brings me then to the last part of our presentation, the summary with the key takeaways. So, as mentioned, it was a solid start for us into the financial year 2026 with a stable sales at around EUR 2 billion, supported by the growth, which we have in Electronics and Lifecycle Solutions. We have a decrease in profitability in first quarter 2026 with mentioned negative volume and mix effects.

Net cash flow improved year-over-year by EUR 12 million. Based on our acceleration of cost reduction, the net cash flow on the other side is impacted by our continuous restructuring and the related cash out. And we have a clear CapEx governance in place to monitor our CapEx expenses. And based on that, we are on track to achieve our 2026 outlook.

In regard of outlook, as you have seen on the chart before, there is no market tailwind to be expected. The opposite is the case. But despite that, we are confirming our 2026 outlook with the sales between around EUR 7.4 billion to EUR 7.9 billion; OI between around 5.4% to 6%; and net cash flow at least 1.8%.

With the related basis, I mentioned the S&P of 91.4 million light vehicle production forecast.

The impact of the conflicts around the world need to be further monitored and are currently not foreseeable have our actions in place and monitor it carefully. We have a strong focus on our Lighting Transformation program which we are executing right now with a consequent realization and transformation of the program to reduce costs and restore our competitiveness sustainably where we have a strong focus on disciplined investment. And on the other side, we are focusing on profitable acquisitions to support then growth again in Lighting in 2027 and beyond.

Yes. With that, we are at the end of our presentation. Thanks for listening. And now we are open and happy to take your questions.

[Operator Instructions] And we have the first question from Thomas Besson from Kepler Cheuvreux.

Thank you very much. I have 2 questions. I'll ask them one-by-one, if that's okay? I'd like to start with the cost increase that you've mentioned. Could you remind us your main exposure in terms of raw materials, including electronic components, and both your ability to access them and your ability to pass the higher cost through to your customers, please? That is my first question.

Philippe, do you want to start answering that?

I'll let you do the full answer.

No, okay. So yes, for sure, we have, based on the actual geopolitical conflicts, we have first impact as well on our material costs which we are working on, on the one side. And on the other side, what will then come to us, we will consequently as well address to our customer base. This is a procedure which we are used to since many years. And we have here close and trustful relationships with our customers, and there is a mechanics installed in the meanwhile, how to handle that.

Okay. So you assume you're going to pass through 100% of the higher cost and you have no issue accessing any raw materials or memory chips or anything, everything is fine?

I will not talk about 100%. I'll just tell you the usual procedure is we are handing over our cost increases, be it based on raw material or be it based on price effects of components, which we are using to our customers. And we are here in close and intensive discussions with them. In some cases, we have even standard mechanics installed in the contracts in the meanwhile. In other cases, we are negotiating that case-by-case in a trustful manner.

Okay. My second question is on the R&D, which has impressively declined. Could you confirm if there has been any change in the proportion of your R&D spend that has eventually been capitalized or whether you haven't changed anything and it's a real and absolute decline that we can assume continues for the rest of the year?

Yes. This is a decline, and we have basically reduced our heads in terms of R&D by more or less 600 people since Q1 last year. So the biggest effect is really coming from savings and restoring effect on the R&D side.

Yes. And for sure, we continuously work on our high-cost best cost share and we'll continue working on that, and we work on R&D efficiency in different ways, working on improvement on processes and procedures and we start as well using AI in R&D to improve the processes further with that reduced cost.

Just to make sure I understood correctly, there is no increase in the capitalization ratio?

No.

Great. Next question, your Lighting business had a tough quarter despite the spike in Asian business. Could you help us just understanding when the trough is going to be in terms of revenues and profitability? Was it in Q1? Or is it still to come?

The whole year 2026 will be a difficult year for Lighting. And as I mentioned in my presentation, Lighting has 2 topics to be solved and where we are working on. The first is we have, based on the situation out of the past, we have reduced volumes, because of bigger programs run out on the one side. And we have, on the other side, programs, which are showing lower volume than expected because of the different take rates of e-mobility. Therefore, we are working consequently on acquisition of new programs, where, as I have shown to you, we have successes in acquiring new programs. And with the new programs going then in SOP, we will go through the dip of sales.

On the other side, we have our bottom line performance program as a part of Lighting Transformation program where we consequently work on improving the cost situation and with that working on bottom line performance that has already first effects. And with every quarter, we are working now further on this program, the effects will increase. On the other side, we have the the unfavorable market conditions, which is influencing bottom line negative. So -- but you will see step-by-step that we will improve there.

I have one last question, which is more general. We have seen the European Commission coming out with its automotive package in December and drafting the IAA in March. Your understanding of this, could you please help us understanding whether you think it means that your clients are going to continue to push you to cut capacities in Western Europe to source in other countries that may have ties with Europe and that are deemed to be part of this cooperation under IAA? Or do you think that once your large restructuring efforts are still ongoing are done, you won't need to go further?

We have to say in this way. Our customers are expecting us to be competitive. And competitiveness has to do with many different boundary conditions that has to do with the competitive production, but as well competitive logistics and this is overall then providing the competitive package to our customers. So I cannot answer that in a black or white way. We have customers who are happy to work with us in the setup as we have it and other customers are asking for further competitiveness improvement in regard of the manufacturing setup.

But one thing is clear. If you look to European vehicle production volumes, they went down in the last few years, and there is no sign that, that will recover. So therefore, for sure, there is a reduced manufacturing of light vehicles in European area. And based on that, there is as well related adoption of the production capacity necessarily.

The next question from Sanjay Bhagwani from Citi.

My first one is just a follow-up to Thomas' question on Lighting. So we do understand that the whole of the '26 can also be challenging for Lighting for the factors you mentioned. But I guess the question is like, is there the improvement measures that you mentioned, both around the top line and the bottom line? Do they start to flow in from Q2 and/or Q3? That is basically, can the Q2 for Lighting on the sales and EBIT side can be better than Q1 and Q3 and Q4? If you can provide some color there? Or for the full year, probably it's likely to be same trend?

Let me start with top line. In regard of top line, you know automotive business, Sanjay. I mean, what we are acquiring right now, depending on the region is kicking in as sales in most cases, earliest next year and next, next year. For sure, this Chinese speed, which we are now capable to do, we have as well development phases of 9 months and have then sales kicking in. That's why you have seen on one of my charts that we have as well business acquired with an SOP in 2026, which shows you that this is possible short term, but with a limited influence. So that means there should be no significant change in -- or improvement in top line to be expected for Lighting this year.

Then next year, step-by-step, the new acquisitions will kick in. In regard of bottom line, yes, for sure, we are having positive effects with our bottom line improvement program. They will kick in step-by-step. But on the other side, we have to consider as well negative effects, which we are still maybe getting out of mix. Therefore, don't expect significant improvement for the remainder of the year on the bottom line, maybe a slight improvement could be possible.

That is very, very helpful and clear. So my second question is now just on the group level, on the trading update for Q2, would you expect the Q2 margins to be already within the guidance range and then same for the cash flow? And yes, any color on the latest trading will be very helpful.

That is something, Philippe, you want to answer, maybe.

Yes. So we don't really comment on the expectation of our Q2 or in terms of margin and cash flow. But overall, we should be in the range of what has been published for Q1.

We have confirmed our guidance, and therefore, it's to be expected that we will be in that ballpark.

And the final one is on the guidance range. I think you did mention that it's based on the actual S&P numbers. But does the lower end of the guidance range, does it have some more cushion? So for example, if you see, let's say, maybe 1 or 2 percentage point production downward revisions across the regions? Does the -- can the lower end of the guidance range absorb this? Or this is at this point too early to comment?

That's too early to comment. We keep the guidance confirmed as we said, and we, by purpose, have a range in there. If you remember our call when we announced year-end results 2025, we have shown to you at that point of time, the light vehicle production volume of February, and that was slightly higher in comparison to what we have shown you now in April. Despite the reduction of light vehicle production volume, we confirmed our guidance that gives you an indication that we have, by purpose, brought to you a range, and we still feel comfortable with the guidance given the slight reduction of light vehicle production. More, I cannot comment on that, but we confirm the guidance as well with the actual LVP numbers.

[Operator Instructions] At the moment, we have no further questions.

Okay. Good. Then thank you very much for joining. Thank you very much for your questions. And thanks to the operator for moderating and facilitating.

Good morning, ladies and gentlemen, and welcome to the HELLA Investor Call for the HELLA Annual Results Fiscal year 2025. The call will be hosted by Professor Peter Laier, the CEO; and Philippe Vienney, the CFO. [Operator Instructions] The floor will be open for questions following the presentation. Let me now turn the floor over to your host, Professor Laier.

Yes. Good morning, everybody, and a warm welcome in the name of Philippe and myself to our 2025 results call. We go first through the presentation, if you can go to the next slide with the following agenda. We would like to talk first about achievements in 2025. Then Philippe will have a look to the financial results in 2025 more in detail and we'll talk about the outlook for financial year 2026. Then I will talk about the strategic priorities for 2026 and the key takeaways. And after that, we will come to questions.

Yes, let me first talk about the achievements in 2025. we have seen an increase of profitability in 2025 and a flattish development of sales. Excluding FX, where we ended up with EUR 8.017 billion sales. If we consider FX, then we have a reduction of sales of 2.1% to EUR 7.55 billion. Our growth continues in electronics, where we grew by 6.9% to more than EUR 3.2 billion, specifically driven by products like radar sensors, battery management systems, car access systems and others. And important to say, we grow in electronics in all regions.

On the other side, lighting sales, our other business group is -- has dropped down in 2025 in comparison to 2024 by 8.2% to a little bit more than EUR 3.6 billion. That is related to some phaseout of high-volume programs and only partially compensated by new ramp-ups of new business. Our third business group, Lifecycle Solutions had a reduction of sales of 3.6%, down to EUR 975 million, mainly impacted by a declining market of key customer groups like commercial vehicles or off-highway products. Here, we had 2 different half years. The first half year 2025 was characterized by a difficult market environment, while the second half year already showed improvement.

Yes, with a flattish sales, we have operating margin improvement. We increased to 6%. That means an increase of around about 60 -- sorry, not 60, 50 basis points. That is the result of an acceleration of our cost reduction measures. We had, for example, a contribution from restructuring of around EUR 60 million in the OI margin and as well the focus on improvement on R&D expenses by a reduction to 9.3% of revenue. R&D expenses or an improvement of nearly 70 basis points drove the operating margin improvement.

Next slide. Yes. The -- based on the operating income margin improvement, we had as well a significant improvement of our net cash flow. It increased by 68% to EUR 318 million. Prior year was EUR 189 million. That means our net cash flow to sales ratio increased from 2.4% to 4%. That has to do on the one side with increased funds from operations, but on the other side as well a strong optimization on CapEx.

Related to that, we have a net income of EUR 93 million in 2025. That is a significant difference to prior year where we were at EUR 371 million, but this EUR 371 million included a book gain of EUR 116 million by the sales of shares of Invest. And we have, for sure, restructuring costs in there. Based on the EUR 93 million net income, we decided to continue with our established dividend policy of around about 30% of the net income. And based on that, we propose to the AGM, which will take place on April 30, EUR 0.22 per share as a dividend. That means a total payout of around about EUR 24 million.

Next one. Yes. Another important figure for 2025 was our order intake. Again, strong order intake in 2025 on the same level as 2024, EUR 10 billion order intake. I think remarkable is that we have more than 50 -- in detail 52% order intake from Asia Pacific and North and South America, so non-European regions, which we have identified as a growth arena, and we execute now the acquisition as well in that regard to grow specifically in APAC and North and South America.

Our growth specifically in Electronics will continue. Over 60% of the acquisition of the EUR 10 billion came out of Electronics and here specifically out of our innovation fields, like, for example, sonar modules, intelligent power distribution modules, smart car access or our radar sensors. And in addition, 18% of our acquisitions in last year came from Chinese, Japanese, Korean and Indian OEMs, which is another growth arena, which we have identified. For example, over EUR 1 billion of this 18% are coming from Chinese customers, which is showing that we are growing here in this market as well in the future.

Next one. Yes, some further highlights of 2025 to show that we are on a strong path to confirm our technological leadership. You see here on the left side that we showed on several areas, for example, in Auto Shanghai, some premiers, for example, our integrated iConF ASIC, which is electronic fuse and a highly integrated electronic circuit module. We showed our next-generation ForWave7e radar sensor, and we showed sustainable headlamps and rear lamps so that we have here strong new products in our portfolio. That led to prestigious awards, specifically in China, where we, for example, got the Zhilu award for sustainable exterior lighting presented by a media group in China or where we got the Gasgoo award for COFI LEAF interior lighting. Or we got for iConF, our eFuses in development and innovation award and the Golden Ball Award.

So all of that is showing that our innovations are as well highly recognized in China, and that will lead in 2026 to further business wins. In regard of lighting, we had the debut of our micro matrix flat lighting as a daylight running light, we introduced last year on the rear lamp side and last, last year on the rear lamp side and last year then on the front lamp side, and that significant innovation on the lighting side led as well to a CLEPA Innovation Award where we are specifically proud about in November 2025.

Intelligent Power Distribution Management was launched into production as a first kind of the product. And that is important because it's a fair operational power supply in the vehicle, which is needed specifically for the new architectures and the new safety regulations in vehicles. And the same is valid for our intelligent eFuse.

Next. Yes, with that, handing over to Philippe to talk briefly about our financial results in more detail. Philippe?

Yes. So in terms of sales, so we are -- sales are relatively stable if we exclude the FX impact. So you see we have published EUR 7.8 billion of sales, of which EUR 154 million is related to FX impact, so relatively stable. And again, this is combining sales increase in electronic as it was already mentioned on several segments in radar car access system and battery management system. When -- and lifecycle was relatively stable, while lighting was also down versus last year due to several projects which are ramping down in mostly in Asia. So lighting specifically, here, lighting is excluding FX rate at 6.7% down in terms of sales at EUR 3.6 billion. Operating margin at 2.9 versus 3.4.

So here, again, we have suffered from various large programs, which have ramped down in -- especially in Asia and not fully offset by ramp-up in North America or in Europe with other programs. So the volume has impacted the gross margin, not fully offset by fixed cost reduction, but we were able to reduce the SG&A and R&D, offsetting a bit this impact from the volume, so leading us to the 2.9% of operating margin.

Going to electronic. Without exchange rate effect, the electronic grew by 8.7%, EUR 3.2 billion with an operating margin at 7.8%, 6.9% last year. So here, we are benefiting from the volume increase and the sales increase. And we have also been in electronic able to reduce the R&D cost also in SG&A. So this is leading to the, I would say, strong improvement in the operating margin for electronics. Lifecycle, so minus 0.6% on sales, which is mostly coming from H1, especially on the commercial vehicle linked to agriculture and construction business, H2 was back to a more stable sales or even slight increase versus last year. But all in all, it's a sales reduction and leading to an operating margin of 11.1% versus 9.6%. So here also, we have some benefit of the restructuring and cost down that were implemented already during the year.

And we also have the profit of building sales that is accounting for EUR 7 million in this result. So the full P&L. So here, we have -- so sales decreasing by 2%. Gross margin -- gross profit at 23% versus 22% this year. So yes, we have a slight decrease in the gross profit. Again, the volume was not fully offset at the gross profit level by fixed cost reduction, so mainly coming from lighting. We have also suffered from some warranty costs that were already highlighted in previous calls.

We have been able to reduce the R&D sales -- R&D costs, so 9.3% versus 10% last year. So that's the consequence of the measure, which have been taken on the cost reduction. And SG&A are flat, reducing in terms of absolute value to be stable relative to the sales which are going down. So OI at the end was at 6% versus 5.6% last year. EBIT at EUR 303 million versus EUR 469 million last year. So here, we have the combined effect of last year, we had a profit linked to the BHTC sales for EUR 119 million in the EBIT. And this year, we don't benefit from this one-off positive effect. And on top, we have also restructuring measure, which has been booked close to EUR 140 million, EUR 145 million for this year '25. And we have also some impact on the taxes with mainly on deferred taxes impact with different effects by countries, which are also contributing to higher tax effective rate than we had last year.

So leading to EUR 92.7 million of net income versus EUR 370 million last year. In terms of cash, so as said, we have generated EUR 318 million of cash. So it's a strong increase versus '24, EUR 129 million more than in '24. So here, we have the combined effect of better funds from operation, which is contributing to these results. We have a slight improvement on the working capital as well, thanks to payment terms, which are better in terms of accounts payable payments. And we have also a strong decrease in our CapEx, reducing by nearly 24% versus last year with a higher efficiency on the CapEx, also linked to the volume reduction that has contributed to this cash generation.

Now for 2026. So this was based on the Standard and Poor's Global Mobility of February. So we were anticipating a decrease of 0.2% in terms of sales with a decrease in all markets, in all regions. So with this, we have built the guidance. So the guidance is in terms of sales between EUR 7.4 billion and EUR 7.9 billion of sales. Here, we still expect a decline in sales in lighting, still suffering from the mix -- product mix and customer mix. So still a deterioration is expecting on lighting when electronic and lifecycle are expected to be -- to show a moderate growth, but -- versus 2024.

OI margin is guided between 5.4% and 6%. So here, we also expect Lighting to be still deteriorating versus 2024. Electronic And Lifecycle should be more or less at the prior level. So lighting, we are starting the transformation plan. Restructuring are taking place, but the full effect will be really visible in '27. And this is also why we have a cash flow, which is guided at 1.8% of sales, so lower than what we have been generating in '24 because we're going to have much more cash out in terms of restructuring in '25 to the tune of more or less EUR 50 million more. And we also have CapEx, which are expected to be not as low as in '24 because we need to start to build and invest for the growth, which is expected in the coming years. So that has led us to guide the cash flow at a minimum 1% of sales.

With that, I think we can move to the strategic priorities, Peter?

Yes. Well, thank you very much, Philippe. Then let me talk a little bit about strategic priorities. As described by myself before and by Philippe, we have a different nature of our businesses actually. And this led us to the decision that we structure our businesses in 2 buckets, a growth bucket and a value bucket. And those 2 clusters are complementary for a company because you need to have those areas where you want to grow over proportionally and you need to have groups in your business where you want to focus on from performance and on bottom line improvement.

We have decided that we want to specifically grow in the next few years in electronics, and that's why we put electronics in our growth cluster. It's our core engine of growth. This market is growing over proportionally. I mentioned on Capital Market Day that vehicle production will most probably grow by somehow 1% in the next few years, while we see a market growth in our areas where we play in electronics of around about 10%, and we want to capture this market growth. And therefore, we want to accelerate our long-term growth over there and increase profitability. And we want to reinforce our technology leadership in that area.

As I mentioned, we select carefully our areas to play in, in electronics and select them by our strengths and by the market situation to assure that we can capture the growth in a profitable manner. On the other side, we have our value segment, where we have our business group lighting in there. In lighting, as we have mentioned, we have seen a reduction of revenue in 2025 in comparison to 2024. And we have a margin situation, which is a call for action to improve sustainably the margin to unlock the potential, which we have over there. Therefore, we have introduced a transformation program now in lighting, where we have a strong focus on reducing costs and restoring our competitiveness and where we have a strong focus on disciplined investment.

Lighting is a technology leader where we have a strong and good relation to our customers. What we have to do now is we have to improve sustainably margin by a consequent realization of the transformation program on the one side. And on the other side, we have to focus on acquisitions in lighting, profitable business acquisitions to support growth then in the years 2027 and beyond.

Lifecycle Solutions is a totally different business than the OE businesses of lighting and electronics. Here, we are a strong player in the independent aftermarket, but as well in commercial vehicles and off-highway vehicles as well as in workshop shop products. Lifecycle solutions will grow further, but we will have a strong focus in Lifecycle Solutions on cash flow generation on the one side and maintaining our double-digit margin. So it's a clear cash contributor for us as a company.

Next one. Allow me to have a specific focus on lighting. So if you look to the upper left side of this chart, what you see over there is the sales development on the one side and the operating income margin development on the other side in lighting. So if you look a little bit more in detail to that, we have a reduction of sales in the last 3.5 years. 2023 to 2024 was, if you compare financial years, somehow stable, slight increase. But if you look to the half year, you already see in second half year 2024 reduction of sales, and that continued then step-by-step in the course of 2025 and first half year further reduction in comparison to second half year 2024 and in half year 2 2025, next reduction in sales.

And that came specifically in second half year 2025, along with a reduction as well of OI margin. The sales reduction is driven by market volume losses and reductions in Europe. And as I mentioned, some high-volume programs, which came to an end. And we have in principle due to the overall situation in the market pressure on margin. And our business is as well characterized by some operational topics where we have room for improvement.

So all in all, what does it mean? We have experienced a sales reduction, and we have room for improvement on our performance. And that's why we have now initiated a program where we focus on the one side, and you see that on the right side of that chart on streamlining our business by executing our European competitiveness program on the one side and where we address the overcapacities in our production network. We have a global cost reduction program initiated, which we call Simplify to improve bottom line by several actions. This program is now up and running.

And besides the improvement of bottom line performance, we have a strong focus on profitable acquisition of new business, where we have started a design to cost and a strong target costing initiative, a lean invest initiative to get more competitiveness on the lighting side that enhance our acquisitions, which will then drive in a second step further growth in lighting as well.

So to summarize lighting, a strong focus in 2026 on bottom line performance improvement while as well focusing on new profitable acquisitions to assure at first a margin improvement then for the years to come '27 and beyond. And on the other side, then realize growth with new acquisitions.

Next one. So you see here, we have the growth of our customer base as a clear focus in lighting, where we want to grow specifically outside in Europe and North and South America as well as in China. We have now decided to enter as well India as a market for lighting. We have to stabilize our order intake in Europe, and we need to develop a future-proof portfolio with affordable innovations specifically to address the volume segment.

Operations transformation, very important that we transform now fast our plants in Europe and in the Americas, have a strong focus on plant performance improvement by having a program introduced to focus specifically on that and using the FORVIA Excellence System as a joint program to improve our plans further. And a strong focus is on asset lean investment, and that means an increase of asset utilization and optimizing of our material lines.

In regard of competitiveness, we have our R&D improvement program up and running. Focus is here to reduce costs and development lead times. We are working on an improved product and technology offering with a specific focus on modularization and standardization, which brings us as well in the position again to have a better usage of our equipment if we have modules and not customer or customized products, which we are producing. And we have a strong focus on design to cost and redesign to cost to improve competitiveness further. And that all comes along with a streamlined organization with a clear end-to-end governance and the strengthening of our regions, which we call divisions.

We want to have an empowerment of our regions and the decision-making over there to be faster and closer to the customers and with that gaining further competitiveness. Yes, with that, let's come to the key takeaways. To summarize -- so summarizing 2025, I think, overall, a very solid performance, stable sales, specifically supported by growth in electronics. We have increased profitability driven by acceleration of our cost reduction activities. We have a remarkable and significant improvement of our net cash flow driven by operational performance and CapEx savings. And we continue with our dividend policy, and that leads us via 30% of net income to 22% per share proposed to the AGM, which is taking place 30th of April.

So overall, we have met 2025 fully our outlook, and that confirms the stability of the company on the one side and the outlook which we are giving can be trusted in. If you look to 2026, our outlook has sales between EUR 7.4 billion and EUR 7.9 billion, operating income margin between 5.4% to 6% and a net cash flow to sales ratio of at least 1.8%.

So I would like to underline this outlook is based on the assumption of a somehow flat light vehicle production volume of 92.8 million vehicles for 2026. But we have to consider we are living in a volatile and challenging industry environment, and we have to monitor closely what is happening geopolitically and macroeconomically, and we will adjust fast to the changes which may be about to come. 2026 will be characterized as a transformation year on the one side and a year of preparation for further growth. So therefore, we have organized our portfolio now into 2 complementary clusters with clear roles and strategic priorities.

We have electronics in the growth cluster to accelerate profitable long-term growth and related improvement of profitability, while we have lighting and lifecycle solutions in the value cluster. Lighting has a clear focus on restoring competitiveness and with a holistic transformation, improved bottom line performance by lifecycle will sustain double-digit margin performance and is a strong contributor of cash flow generation.

With that, I'm at the end of our presentation and would like to open the floor for your questions.

[Operator Instructions] The first question comes from Christoph Laskawi from Deutsche Bank.

The first one will be on current trading. If you could comment just how business was essentially year-to-date. And if you saw any sort of impact from the Iran war with regards to volumes that's changed short term or higher volatility, anything in cost or availability of parts?

And then the second question would be on Lighting. You highlighted you try to tap into the mass market more than the premium side to gain volumes. How easy is it for you to get business in that. And at what margin can you acquire that. Just thinking because you are chasing volume to some degree to improve utilization of the plant, can you be very selective in what you take on as order intake and what the margin should be initially? Or is that something where you need volumes first and can be more selective later?

Yes. Thank you, Christoph, for the questions. Starting with what you call current trading. The first 2 months of this year were characterized by business as expected. So actually, in the first 2 months, we have not seen a specific influence of Iran war. What we have seen is specifically in China, a little bit longer closure of some of the OEMs after Chinese New Year because of the market overall situation. But in principle, I would say it's somehow according to our expectation in the first 2 months.

We have actually up to now, no significant influence on our supply chains coming out of the actual geopolitical tensions. What we have to say, clearly, we have to monitor that very carefully further what is happening there and what does it mean for our supply chain? What does it mean for our bill of material. And what does it mean for our overall business that we have introduced in the company here, a task force, which is working on that, and we monitor it very closely to be fast in reaction on possible changes. But up to now, we do not experience some influence in that regard.

In regard of lighting, I confirm what you said. We have a clear focus in acquiring business in the volume market. We want to do that with our specific approach of affordable innovations. And based on that, we are convinced that we can do that with a related margin expectation. For sure, we will be selective on a business acquisition, and we need to find the right balance on filling our capacities on the one side and focusing on bottom line performance on the other side. We have a strong focus on that, and it is absolutely clear with the main target to improve profitability in Lighting in the upcoming years, we will have a close look on bottom line performance to assure that, that is realized as well with the new acquisition.

The next question comes from Sanjay Bhagwani from Citi.

My first one is a follow-up to Christoph's question on the current trading. I think thank you for clarifying that so far, you have not seen any significant impact from supply chains. So when we have to think of the first quarter now that we are already in March, are you already trading like the margins are within the guidance corridor? And if you can provide some color on the sales and margins for Q1.

I want to say something to that. I think we do not give any comments on this going forward. The only comment we can give, I would propose is we have January, February according to our expectation. March is an ongoing month, we cannot comment further. As I mentioned, we see no actual significant influence on the geopolitical tensions on our business, but we have to monitor that further. Do you want to add anything?

And Q1 is already impacted by Chinese New Year. So a bit lower sales than the other quarters. But yes...

That's helpful. And my second one is on the pricing pass-throughs and probably potential inflation. So maybe can you please remind us your exposure to the oil and derivatives, for example, to the plastics or some sort of chemicals, what sort of like your -- as a percentage of sales or cost that is and the same for the metals. And on the pricing pass-throughs, is this -- I understand largely, this is all indexed. And so I just wanted to understand what sort of time lag in the pass-throughs here we should keep in mind. If there is an inflation, of course. And then also, I understand you may already have hedging in place for some part.

Yes. Maybe I'm starting, Philippe, if you want to, be happy to step in. We have a common practice now since years how to handle inflation with our customers jointly together, and we always have found reasonable solutions, and we will continue with that in principle. But there's a clear policy in the company that we are working on inflation effects on the supply base on the one side and on the customer side on the other side to assure our profitability.

In regard of influence of oil derivatives, you mentioned, Sanjay, rightfully, maybe the biggest influence of oil derivatives we have in molding material, where we are already working with our supply base to find solutions in that regard. And the related remaining effects, we will then discuss with our customers. Metals are not playing a significant role in our portfolio. So that I would say, in regard of those major areas, that is on the one side, molding material and on the other side, copper, which is having an influence on our business. We have contracts on the one side with our suppliers and on the other side with our customers where we have classical material clauses in.

They are different from customer to customer. They are different from supplier to supplier. But overall, our target is clearly that we are not suffering on the inflation that we are working in a partnership manner with suppliers and customers to find reasonable solutions to protect our bottom line.

On the electricity and gas, we have more or less more than 50% hedged. So that's protecting us a bit.

That's helpful. And final one on Lighting profitability improvement. I understand that this may continue to -- I mean, you have already flagged that this may be down for the full year. But would you expect the improvement may start coming already from H2 this year or this can be more of H1 '27.

We started initiatives on the bottom line, we will see step-by-step improvements on the bottom line. For sure, the majority of the effects we will see in 2027, but we expect some of the measures getting already or improving the situation as well already in second half year this year, but the majority of the effect we will see 2027. And in regard of acquisitions, you know the nature of the business, Sanjay, acquisitions which we are doing right now are a little bit depending on the region are kicking in, in '28, '29 and beyond. The only exception is maybe China where you have this Chinese speed as well as some opportunities already to have maybe acquisitions, which are now done kicking in end of '27, beginning of '28.

There are currently no further questions. [Operator Instructions] I hand back to Professor Laier for closing words.

Yes. Then thank you very much for joining our investor call for the 2025 results and outlook 2026 this year. Thank you for your questions and wish all of you a nice day. Thank you very much.

Thank you.

Good morning, ladies and gentlemen, and welcome to the HELLA Investor call on the preliminary results for the fiscal year 2025. The call will be hosted by Dr. Peter Laier, the CEO; and Philippe Vienney, the CFO. [Operator Instructions]

Let me now turn the floor over to your host, Dr. Peter Laier, CEO.

Yes. Thank you very much, and good morning. A warm welcome to everybody for our call in regard of HELLA's 2025 preliminary results. We have structured the presentation today in 4 parts. If you could go to the next slide, please. The first is an introduction of myself because I'm newly assigned as a CEO of the company. The second will then be focused on preliminary results 2025, followed by a company outlook and the strategic priorities at the end, then we will summarize the key takeaways for all of you and then open the call for questions.

Yes, let me start first with a brief introduction of myself. I'm now since somehow 3 decades. If you could go on Slide 4, please. Thank you. I'm now since around about 3 decades in automotive industry, started my career at Continental Automotive, where I used to work 13 years in electronics and sensorics, used to work in Asia, leading the Continental Automotive business in Japan and Korea and then were responsible for chassis and for brake systems. After that, I joined OSRAM in 2013 as a CTO, did the spin-off with the Board of OSRAM at that point of time.

And after that, joined Benteler as a COO of the company. And the next stage was Knorr-Bremse as being a Board member responsible for the commercial vehicle business. And then joined ZF Friedrichshafen, where I was responsible for commercial vehicles and industry business and for operations and purchasing for ZF globally and now being assigned as a new CEO at HELLA since 16th of February. So pretty new in this role. And in that role, I'm pretty happy to welcome you here in this first preliminary result call for the HELLA results of 2025.

Okay. Then let's look to the preliminary results. If we could go then further in the presentation on Chart 6. Thank you. Yes, to summarize, the organic sales of HELLA in 2025 were somehow stable with EUR 8 billion. 2025 was characterized by strong net cash flow performance and an increase of profitability.

How does it look a little bit more in detail? As I mentioned, the HELLA Group organic sales were at prior year level of around about EUR 8 billion, including a negative FX down by 2.1%. So we had a strong sales development in Electronics across all regions, for example, notably driven by our radar sensor business, our battery management systems and our car access to just give some examples of growth.

On the other side, our Lighting business was affected by the phaseout of some programs, which we partially could compensate by a ramp-up of new headlight and rear combination lamp business in this business group.

In Lifecycle Solutions, we had a positive organic sales development in second half year 2025. That resulted in an operating income for HELLA in 2025 of EUR 474 million in comparison to EUR 446 million in 2024. And this resulted again in an operating income margin increased by 48 basis points to 6%.

What we see is that the acceleration of our cost reduction measures with savings, particularly in R&D, drove efficiency and with that structural adjustments. On the other side, the positive effects out of those measures were partially influenced by negative volume and mix effects and that resulted in the mentioned operating income and margin.

If you look shortly to net cash flow, we increased the net cash flow in comparison to 2024 by EUR 129 million to a remarkable level of EUR 318 million in 2025. So that led to a ratio to sales of 4% in regard of net cash flow and that in comparison to prior years, 2.4%, a significant increase. So we had a higher cash flow on the one side from operating activities, EUR 58 million improvement and the other improvement came out of CapEx savings, a part of our improvement program, EUR 105 million savings here.

In regard of order intake, we had again EUR 10 billion, which is showing a strong demand for our core products as well as for our innovations.

If you look a little bit deeper to order intake, what we see is an intensified business, which we could achieve in North and South America with -- on the other side, with local OEMs in China, some gains in Japan and in India, that leads to an overall more than 50% share of order intake outside of Europe. This shows that we have a strong demand for our HELLA core products and our new technologies, for example, like intelligent power distribution modules or zonal modules, some of our core innovations and new technologies.

If you look now a little bit deeper in the business group, I hand over for that to Philippe Vienney, our CFO. Philippe, please.

Thank you, Peter. So good morning to all of you. So looking at some more details per business group. Let's start with Lighting. So Lighting, we had total sales in '25 of EUR 3.7 billion versus EUR 4 billion in '24, with an operating income of EUR 106 million, which represents 2.9% of sales versus 3.2% in '24. So in Lighting, we are suffering from discontinuation and very large volume series projects, especially in America and in China, which are going down, which is impacting the top line of Lighting.

We have also to face some weakness in the European market on some specific products impacting the Lighting business group as well. On the other side, we have some ramp-ups and increase of volumes for U.S. OEMs, but which is not enough to compensate the sales drop that we are facing in China and in Europe. So at the end, the operating margin of Lighting is at 2.9% against EUR 106 million, so yes, mostly impacted by the volume and the loss of revenues, so which is impacting the gross profit, which have been partially offset by some structural measure on SG&A and R&D, but not enough to sustain the margin that we have posted in '24.

When we look at Electronics segment, here, we are reaching sales of EUR 3.4 billion versus EUR 3.3 billion in '24. Operating margin at EUR 269 million, which is representing 7.8% of sales versus 6.9% in the year '24. So here, the sales are still highly driven by radar and electronic power system, mostly in Americas and in Europe, so which is benefiting to the top line.

We have also a good start-up with the smart access system in Europe and in Asia. And we have also in China, the low-voltage battery, which is also ramping up and adding sales as well. So here, we have an operating margin of 7.8%. So the volume is helping us a bit. We have also had the SEK sales or tooling sales, which have helped us in Q4 to increase the margin. And we are also spending much less in R&D, and we are doing some savings in administration as well, which is helping the operating margin versus what we have been doing in '24.

Looking at Lifecycle Solutions. Here, we have sales which are nearly stable at EUR 1 billion like in '24, with an operating margin at EUR 109 million, which is 11.1%. So here, we have basically a stable market or stable sales on the spare part business. So reported sales is slightly negative due to FX rate, but the activity is mostly stable on the spare parts.

On the other hand, we have lower demand on the commercial and agricultural businesses. And we have -- but we have some rebound or some slight increase in H2 '25 on this market, which is -- which has helped a little bit the year '25. Operating margin at 11.1%. So here, we have an increase on the gross profit due to the savings and the restructuring.

Plan, which had been undertaken in this. And we have also some savings on the R&D side and distribution costs, which have also helped the operating margin.

Now if we look at the demand and the order intake, I hand over again to you, Peter.

Thanks, Philippe. Yes, if you could go to the next slide, you see there are some order intake highlights for 2025.

As I already mentioned, more than 50% of our order intake share came from regions outside of Europe and that you will see as well in the different business groups. So let me start with Lighting, where we had some further acquisition successes in the Americas as well as in Asia. You see here on the chart some examples like, for example, car body lighting and headlamp business for different mass market models for European OEMs. And I think that's an important message that we are penetrating further the mass market now as well with a Lighting business.

We won some headlamp packages for different models of European OEMs for the U.S. market with SOPs in '28 and '29 and some headlight packages, including adaptive lighting technology for 3 different series of U.S. OEM for SOP in '28.

I think remarkable in Lighting is as well that we won different headlamp and car body lighting packages for Chinese OEMs for several car models with SOPs in '26 and beyond. And this is executing of our strategy that we want to grow with Chinese OEMs and confirms that we are here on the right path.

If we look to Electronics, we are further winning business to reinforce our position as a market and technology leader in the selected areas where we are going to play and win. And you know that we have a long tradition in selecting those areas carefully and play to our strengths. So you see here with the first example, we have 1 billion orders for intelligent power distribution management and zonal modules from an international premium OEM with SOPs staggered from '25 and '28, which is remarkable. That's confirming our strategy in regard of going in the direction of zonal modules or ECUs.

Then we continue with our success story on radars with a 3 million-digit order for our Gen 5 and Gen 7 radar technology from a European OEM and Gen 7 radar solution for Japanese OEM for the Indian market with the SOP in '27. In addition, 3 million-digit order intake for smart car access from a U.S. OEM confirms here that we are on the right path.

If we look to Lifecycle Solutions, we have new order wins, which increases our customer outreach and which clearly indicates that there is a strong demand for our customized technologies. So for example, we have won a fully customized FlatLight technology for a Dutch bus maker or a customized lighting for an off-road vehicle of a premium manufacturer with SOP in '26. We have different LED front lighting systems, which we won for the European OEM for the Indian market or LED rear lamp for international trailer manufacturer for the Indian market, which confirms as well here the internationalization of our business. And last but not least, we won an LED headlamp from international manufacturer for agriculture technology with the SOP in '27.

Yes, so far to our 2025 preliminary results and related informations for order intake. With that, I would now go into 2026 and would start to talk about our outlook for 2026, followed then by some strategic priorities. If we could switch to Page 10, please. What I would just start with is we are seeing somehow sluggish, stable development of our vehicle production globally and the details will be presented by Philippe. Philippe, handing over to you.

Thank you. So yes, we see a stagnating market in '26 based on the latest figures published by S&P in February '26. So minus 0.2% in '26 versus '25 after '25, which was relatively good in terms of worldwide production. So per region, we see Americas, Europe and even Asia Pacific going slightly down versus '25.

So with this outlook in terms of market. We go to the prognosis or the outlook for '26 for HELLA. So we see -- we would like to guide the sales between EUR 7.4 billion and EUR 7.9 billion. So here, again, taking into account a stable market and still facing some top line revenues issues on Lighting. We have detailed in former calls that we are expecting a rebound for Lighting in '27. So we are still facing this drop in revenues in '26 for Lighting. So leading us to this guidance in terms of sales, EUR 7.4 billion to EUR 7.9 billion.

Operating margin between 5.4% and 6% of sales, also taking into account the revenues, which would be slightly difficult for Lighting. And also having in mind that the full benefit of the turnaround plan of Lighting with the adjustment measures and restructuring measure will take full impact in '27 and '26 will be still the turnaround year.

In terms of net cash flow, we say at least 1.8% of sales. So here versus '25 achievement, basically, this 1.8% is built on slightly lower funds from operations, but we also do expect more cash out linked to the restructuring program with, let's say, people leaving in '26, then the cash will be out as well in '26. So higher restructuring spend in '26. And we also do plan some higher CapEx in '26. We have said that we have been able to reduce the CapEx in '25 by EUR 100 million. We do not expect to do exactly the same in '26, and we are planning to have EUR 50 million more, I would say, in '26 in terms of CapEx to prepare the future, the launches and the rebound, which is expected in '27. So that's all in all, what is behind this outlook for '26. And maybe then we can go to the strategic priorities to figures.

Yes. Thank you, Philippe. Then I'm taking over for that. Again, in regard of our strategic priorities, if we go to Chart 12, please, we see 3 strategic priorities, which determines HELLA. The first is best-in-class performance, the second is business transformation and the third is invigorating culture and organization.

If we look a little bit more in detail to best-in-class performance, that means for us, we need to secure best-in-class execution across all business groups and functions and improve cash flow because this brings us in a position to further invest in the future-proof positioning of the company and in our growth areas. That means we have started a program in the company to simplify all functions to a level of functional excellence on the one side. And as you have seen in the figure presentation of Philippe, we have to transform our Lighting business. And here, we have a strong focus on. In addition, we will continue our competitiveness program where we see already first improvements out of that in the results of 2025 and we will continue in 2026 and do some further structural adjustments.

In regard of business transformation, we will diversify further our regions and our customer base. So we want to become more international and the acquisition of more than 50% of non-European business is showing that we are already on a good path. And with that, we want to strengthen our resilience and with that we want to focus on further growth and a future-proof portfolio. That means we will do rigorous portfolio management with focus on growth and affordability and with clear priority setting. We will then achieve a lower dependency on the European market and strengthen the relationship specifically with Asian and American OEMs. And we will further derisk our global supply chains.

In regard of invigorating culture and organization, we will develop our culture further with a clear focus on the pair of empowerment and accountability and further simplify our structures. That means we want to reduce our complexities in our organization and streamline the processes, and we want to further establish and strengthen regional teams to access local customers, which supports then the mentioned internationalization where we are focusing on. And we will reshape our engineering organization towards the digital age, including using of AI.

If we go to the next chart, let's look a little bit deeper what that means as focus for our business groups. For Lighting, in regard of best-in-class performance, we will definitely focus on affordability of innovations, on simplified functions and reduced development lead times, specifically with a focus on Chinese OEMs. And we will work further on competitiveness in regard of Lighting, and that has a strong focus specifically on the transformation of our plants in Europe and in the Americas.

In regard of Electronics, we will do a best-in-class performance and enhanced regional footprint and focus on R&D efficiency. Then we will work on CapEx and resources. We will allocate our invest in CapEx to the strategically identified selected growth segments. I will talk a little bit more about that as well on the Capital Market Day tomorrow.

And on Life Cycle Solutions, we will consequently use digitalization and leverage AI, and we will further work on our functional excellence and adjust further our footprint in operations.

If we look then to business transformation, diving deeper in the business groups, that means for Lighting, very clear highest focus is that we have to transform Lighting and achieve a turnaround over there to improve margins again sustainably. We will work on a future-proof product portfolio, and that means specifically that we want to address much more the volume segments of the Lighting market and we will work further on balancing our customer mix, and that means specifically working with Asian customers and penetrate more the market in the Americas.

In Electronics, I think we have unique capabilities and know-how in the company, and we will leverage them specifically in regard of battery and power modules for all different electric powertrain vehicles. That means from mild hybrids, plug-in hybrids, range extenders to full battery electric vehicles, where in all areas, these battery and power modules are needed for efficiency. We will use our scale as a first mover to roll out zonal modules, where, as I mentioned before, where we have already remarkable business wins. And we will focus as well here on business wins in the Americas and in Asia.

In regard of Lifecycle Solutions, business transformation, focus for us is on the one side, we will start further product initiatives in the independent aftermarket. We will extend our focus to the mid-price segment and leverage our channel here. And as well here, we focus on international growth in North America and EMEA specifically.

If you look to invigorating culture and organization in Lighting, we will implement a new leadership model in all areas, not only in Lighting, and we will implement organizational responsibilities for our people in an enhanced manner that is the part of empowerment I talked about before. We will work in all business groups on digital AI tools, which we will implement, and we will streamline the decision-making and increase internationalization.

Based on that, if we look to the next chart, in regard of our midterm targets in regard of Lighting, if you can go to the next chart, please. I think you see the presentation anyhow, I will continue. In regard of Lighting, we will transform the business to a sustainably improved profitability situation, and we will broaden the customer base. Based on that, we will further act as a top player in the market, but serving both in the future, premium and volume segments.

In regard of Electronics, I already talked about our unique skill and know-how set. And with that, we will further expand the business systematically and increase profitability. We will here clearly select our business arenas carefully and with that further realize profitable growth. And that means we will use our technology leadership and with that, grow disproportionately in those areas which are characterized by innovation.

And last but not least, in Lifecycle Solutions, we will leverage our market position, our channels to the market and our brand to sustain double-digit margin. And with that, we will play here in the top 10 independent aftermarket player league and in addition, working on further commercial vehicle business and work as a workshop product supplier here further.

With that, I would like to come to the key takeaways. As a summary, if we look to 2025, I think we can summarize that, that was overall a solid performance of HELLA in financial year 2025. Page 16, please. With -- can you go on 16, please? Overall, a solid performance in financial year 2025 with stable sales at EUR 8 billion, supported by growth in Electronics. We have an increase in profitability driven by acceleration of cost reduction. In addition, we had R&D savings and increased efficiency. This led to a significant improvement of net cash flow, driven by the mentioned operational performance measures and CapEx savings. And with that, we met the financial outlook for 2025 fully.

If we are now looking to outlook for the financial year 2026, as I mentioned, we are not expecting tailwinds from the market. And based on that, our outlook for 2026 financial year is a sales between EUR 7.4 billion and EUR 7.9 billion and OI margin between 4.5% and 6% and the net cash flow to sales ratio at least at 1.8%.

To remind you, our outlook is based on around 92.8 million light vehicles produced. And as mentioned, we are still expecting a volatile and challenging industry market situation for 2026.

The 3 strategic priorities going forward are best-in-class performance across all business groups and functions, the business transformation to strengthen the resilience of our business model and the invigorating culture of empowerment and accountability.

Yes, with that, I would like to close our presentation part of preliminary results of HELLA in 2025 and the outlook. And with that, we are opening the floor for questions, handing back to the operator.

[Operator Instructions] So we have the first question from Sanjay Bhagwani from Citi.

Maybe the first one, just zooming into a little bit on the guidance. So is the guidance -- I mean, generally, what we have seen over the past few years is HELLA generally tends to be a bit conservative on guiding, but manages to get to more or less to the upper end of the guidance range for most of the years, except for what we have seen in '21, '22, which was semiconductor crisis. So is there some element of conservatism baked here? Or is the Lighting, I understand you mentioned as a key driver here, so just trying to understand how much of that is conservatism? And what do you think for the Lighting, how bad it can be for '26 before it gets better in '27? That's my first question. I'll just follow up with the next one.

Yes. First, thank you, Sanjay, for the question. Maybe I'm starting and then hand over to Philippe. 2026 will be, again, a year with challenges for our Lighting business. As we mentioned, we have a discontinuation of some big business, which is further influencing sales in 2026 for Electronics as well as for Lifecycle Solutions, we will be at least stable in this year. And then we have to consider the challenging market conditions we mentioned in the presentation that brought us basically to the top line guidance in -- on the level as you have seen. But furthermore, Philippe, handing over to you.

Yes, it's true that the guidance is coming from Lighting, where we see the further sales drop, which is more or less representing the full drop for next year in '26. So Lighting is really the driver of this guidance, which could be seen as a low guidance, but that's the main impact is basically Lighting.

That's very helpful. So if you think like the -- if Electronics and the other division is stable, then if we just back calculate, what we get for Lighting is roughly 9% to 10% decline in top line. Is there a specific program, which is driving this? Or it's broad-based some specific -- so maybe if you can just recap us what is driving Lighting down for '25 and if this continues at a 10% rate in '26? Is that your assumption?

Philippe?

Yes, I think we continue to see the same trend as we had in '25 and started to see in '24. We continue to have some reduction in China with some, again, large programs, which are still going down, not fully replaced. And we also have some weaknesses in Europe, which is also the case in '25. So we continue to see the same trend. And again, some additional sales coming from North America, but as in '25, not enough to fully compensate the drop that we will face in the other 2 regions. So yes, the new programs that we have been able to get will really give us the impact in '27. That's why the '26 is still continuing on the same path as in the past for Lighting.

That's very helpful. Lighting is very clear. And for the other divisions in terms of margin expansion, are you expecting any other like the cost-saving programs may feed into some sort of margin this year for electronics and LCS?

I think as you have heard, we have started our improvement program and this improvement program will have as well some related costs, which we will see in 2026. Therefore, we have in 2026 some influences out of that, which is as well then seen in the bottom line performance, but that will then be the basis for further improvement for the years after that.

[Operator Instructions] And we have one more question from Thomas Besson from Kepler Cheuvreux.

First, I'd like you to help us bridging the performance in Q4 versus the message you had given in Q3. Clearly, vehicle production was stronger, but there seems to be more than that. I mean, at Q3 stage, you had said that Lighting would be probably as bad as in Q3, and it proved to be a lot better. You mentioned some tooling support in Electronics. Could you give us a magnitude of that figure and explain if there's any one-off related to R&D reimbursement or something helping Lighting in Q4 versus expectations? That's the first question.

Yes. So it's true that basically, we had the Q4 SEK sales and tooling were more or less 50% of what we have been booked, so cumulatively until end of September. So strong activity on the 2 E&D and leases, which are also helping in Q4. And then we have some -- finally, some adjustment on claims and pricing also, which have been materialized in Q4 for Lighting, which has also helped a little bit the Q4 results.

Okay. So coming back to the previous questions, I mean, you're suggesting that Lighting is entirely responsible for the guidance for lower revenues and profitability. So do you expect these adjustments you've mentioned for Lighting not to be sustained in '26 and therefore, margins in Lighting to decline? I'm not sure I understand. And can you confirm that you are making no assumption in terms of perimeter on the guidance?

So yes, Lighting, so we do see -- so the tooling sales and SEK sales are more or less not, let's say, more one-off sales or are not part of the -- it could be a bit fluctuating from 1 year to the other. And the second point is all the benefit from the turnaround plan that we are implementing in Lighting and the restructuring and structural adjustment will have a benefit. But it's -- as I said, it's also part of the restructuring is still going on. We're going to have some headcount reduction really implemented in '26. So the full effect is probably more coming in '27 than in '26. So '26, we will have a partial effect of the restructuring plan and the turnaround plan.

Another question on input costs. Can you say a few words about what you're assuming in terms of headwinds? I mean we've seen steel, copper prices, memory prices, even the access becoming more complicated. Can you share with us what you've assumed in the guidance and whether this may eventually complicate the task of improving Electronics margins as well in '26?

Yes. So I think you are referring to the inflation, the material price inflation, which we see more or less now at not new level or not new specific increase, so we think that we are more or less at -- it's more behind us than in front of us. So we don't assume a huge inflation in terms of material price. Obviously, we can have crisis like we had with Nexperia in '25. but we have been able to basically have new sources for products that were delivered by Nexperia. So we have alternative sources. So we are not expecting to be so much impacted by this type of crisis and especially with Nexperia products in '26, thanks to this double sourcing. And we think that the situation is stabilizing a little bit with Nexperia. So this is what we are assuming. So no major impact is expecting on the inflation in '26 to summarize.

Clear. I have a last one, if I can squeeze it in. Is there already a comment on the dividend you may propose for 2025? Or do we have to wait a bit for that?

I think that is too early. You have to wait for the final call when we announce and as well dividend, that's too early today.

[Operator Instructions] So there are no further questions at the moment.

Great. Then I would like to thank everybody for participating in the call. Thank you for the questions. And wishing you all the best. Talk to you soon, latest with announcement of the final results. Thank you very much. All the best. Bye-bye.

Thank you.

Ladies and gentlemen, good morning, and welcome to the HELLA Investor Call on the results for the 9 months of fiscal year 2025. This call will be hosted by Bernard Schaferbarthold, the CEO; and Philippe Vienney, the CFO of HELLA. [Operator Instructions]

Let me now turn the floor over to your host, Bernard Schaferbarthold. Please go ahead.

Good morning to everybody. Very warm welcome to our 9-month results call. And I'm here together with Philippe Vienney, our CFO; and Kerstin Dodel, our Head of IR. So starting off the presentation on Page 4. So if we look at our sales development, we are at 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 9 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 9 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 9 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 2 years. So overall, 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 EUR 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 EUR 23 million in comparison to last year, EUR 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. We had a strong momentum, especially in the lighting business, 2 areas where we wanted to grow. More broadly in the U.S. 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 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 electronics side, we continue to be very successful. So we are highlighting here some of the programs. But what I can state overall that within our Electronics business, we continue on a strong growth path, and this should also support our growth trajectory in the upcoming years. And to finish off, our Lifecycle was also quite successful in the last month. We are highlighting here some of the programs. So bus, agriculture 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 are happy to win also projects outside of Europe and to gain market shares there as well. So overall, we are on track in terms of our order intake achievements after 9 months.

Going to Page 6, some highlights. So on the Lighting side, we continue to see that we are differentiating with our lighting technologies. We are present also in different -- on the different shows and fairs. Here, we are highlighting one, and we are advertising and showing our newest 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. In 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 sonar architecture of the car. And this technology, which manages the power in the car and which is embedded in the sonar architecture and in the new E/E 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. Other than that, we are now in execution in terms of our new SIMPLIFY program. So this is a global program where we are reducing in all white-collar functions in the upcoming 3 years, around 15% on headcount. And so we are well on track. We already started on that program. The target is to be at least at 20% of reduction to the end of this year and around 50% 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 9 months, we have already reduced close to 5% on headcount 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 are building up the alternative suppliers. And in the meantime, for sure, we use -- we still use Nexperia parts. So our relationship today with Nexperia China is still stable, and we also managed to buy broker parts, which in the meantime, supports our supply. So far, I can say that the month of October was in line with our plan. So 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 U.S. and Europe and help there on the shortages. So far, China for us is not impacted. We have enough parts. So this is something difficult to quantify overall. But as I said, so far, the impact was very limited, and we have now to see how next weeks will be and specifically if with -- on the Chinese authorities, the customs and MOFCOM, we are able now to get the necessary applications to the exports to support Europe and the U.S., as I said. But as you can imagine, a lot of intensive work we are doing and managing the situation to keep our delivery promises to the customers.

So having said that, we will move on with some more details on the financial results. Philippe will take over.

Yes. So good morning to all. So looking at the sales, so we are publishing sales at EUR 5.868 billion, so which is representing a decrease of 1.1% versus prior year. And excluding the exchange rate, this would be at plus 0.4% versus last year and versus the market, which is showing a growth of 3.8%. So here again, as I said, we have a good momentum in all region on electronics, whereas we are suffering on the lighting side with lower sales, which are affected by end of production on some programs and mainly in North America and Asia. And Lifecycle was reducing -- showing reducing sales, but which we are also -- where 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 of -- which is showing a decrease of 1.7%. So we are overperforming versus the market for Europe. For Americas, where we have sales which are above the 20% of our sales, we are seeing a decrease of our sales of 1.1%, slightly impacted as well by the FX impact versus the market, which is reducing by 0.5%. So here also, we have the -- 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% of our sales. where we have a decrease on our published sales of 6.4%, 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 series project in lighting, but not fully compensated by new sales 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 looking at the profitability per segment. So lighting, we are at EUR 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 production of some series projects in China and North America. We have some increase on the headlamps and rear combination lamps in Europe and Americas, but which are not enough to compensate the drop that we are seeing in Asia and North America on the rundown programs.

So the operating income for Lighting is at EUR 73 million 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 costs, also some reduced R&D cost and SG&A costs, 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.

Electronics. So we are publishing sales of EUR 2.5 billion or EUR 2.6 billion, which is representing plus 9.5%, excluding FX rates on an 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 Electronics. And this is leading us to an operating income of EUR 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 spend and also thanks to reduction of external spend and external provider. And we have also been able to maintain or even reduce the SG&A percentage in this segment. So all in all, leading to the 7.6% of operating margin.

The Lifecycle, where we have sales of EUR 739 million, which is representing a decrease of 1.5%, excluding FX rates. So yes, 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, a slight recovery in Q3. So especially also on the commercial business with some stable business on the after market. And this is leading us to an operating income of EUR 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 and with SG&A, which are slightly increasing mainly due to distribution costs.

Profit and loss for HELLA? Yes. So we have a gross profit of EUR 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 Lifecycle, 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 benefit of our adjustment and structural adjustment on the R&D side and cut on the external provider, as I mentioned, for Electronic.

On the SG&A, we are at 7.7%. So here, we see a decrease on the administration costs, where we have a slight increase on the distribution costs. So I think the good trend is the administration costs which are decreasing and showing some effect of the program which have been launched to reduce this cost.

On the earnings before tax, so we are reaching EUR 208 million versus EUR 409 million last year. So here, we have the impact -- negative impact of all the restructuring programs, which are booked and are part of the EUR 129 million. To mention that last year, we also had some restructuring costs, 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 EUR 108 million versus EUR 310 million last year.

On the net cash flow, we are at EUR 68 million, so versus minus EUR 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 cash out last year and spent last year for the same period. So this is benefiting to our cash flow, leading us to have a EUR 68 million cash flow for the 9 first months of the year.

With that, I think we are finishing the financial details, and we can go to the outlook.

Thank you, Philippe. So on the outlook, so on Page 17, if we look at volumes, so the actual outlook on S&P is 91.4 million cars. I would expect that specifically on Europe and Americas, we would see some reductions in the fourth quarter due to the shortages on Nexperia parts. China is quite stable in terms of volumes. This is also what we see actually now in the fourth quarter. On Page 18, so we confirm our outlook in terms of sales in the range of EUR 7.6 billion to EUR 8 billion. On the operating income (sic) [ operating income margin ] 5.3% to 6% and the net cash flow of at least EUR 200 million. We are stating that this assumes a sufficient supply situation on -- especially in Nexperia parts. As I said, in terms of -- today, if I look at the month of October and the start into November, the impact were limited, but I also mentioned that the next weeks will be the crucial ones.

So summing it up on the key takeaways. So, so far, looking at the 3 quarters, from our point of view, a robust sales development in line in terms of profit and net cash flow, what we expected, strong focus on the structural changes we have done and still a good momentum on the order intake side. So we -- outlook I mentioned, we see us on track for the guidance we have given. And if it comes to the top priorities, so we continue to work on the structural programs. One important new program we have now initiated is in the lighting area. We have started a transformation program now with -- starting into the second half of the year. Mainly, we focus on 3 big topics.

One is on the business growth. So we need to come back to growth again for that. We are broadening our reach and focusing significantly also on the regions where we see a strong potential, especially the U.S., but also beside of China, Japan, Korea, India. And we already see now in the third quarter, the first successes and programs we could book in quite a sizable numbers. So first, let's say, proof points are given, but I think this is a very relevant point to come back to growth. And on top of that, we are -- we have initiated the operational transformation. We see significant potentials in terms of reductions on our footprint or on our costs within the operations, including also the supply side and logistics. We have initiated a structured program on that, which is specifically for Europe and also for our Mexican operations.

And the third element is the improvement in D&D productivity and efficiency where as well we initiated a program also with a focus on cost reductions on our technology, where we see also a big potential to reduce on the cost side as well here, too. So this should help to bring our Lighting business into a much better profitable situation in the years to come.

Having said that, we are happy to take your questions.

[Operator Instructions]

And the first question comes from Christoph Laskawi from Deutsche Bank.

The first one, coming back a bit to what you just said on the Lighting performance. Obviously, Q3 margin around 1% is very low. When you've implemented all the measures that you talked about, what do you think is in the midterm a realistic margin potential? Could it be around 5% plus? Or any thoughts on that would be appreciated. And then in contrast to that, electronics is actually quite strong in Q3 with 9% plus margin. Was there any specific one-timers in there or just really capitalizing on growth and showing the margin potential of that business?

And then the third question would be on Nexperia. It sounds like you didn't face production shutdowns on your own yet, and you haven't cost any so far. Still you're expecting production cuts to come. Do you already see that in the schedules? Any volatility you can highlight there? And then just on the cost of going to brokers and others, those have been quite high in the semi shortage. Is this something which could be a meaningful impact on earnings in Q4, just the sourcing alternatives?

Thank you for your questions, Mr. Laskawi. So on the Lighting performance, our target is to come back to 6%. But this will not be possible on the short notice. So this is a target we have set ourselves. It will take until '28, '29. So before we are at this 5% level, you said, probably '28, '29 to come closer to the 6%. So we have now seen that, as I said, so we are struggling a lot because, first of all, we are not growing. Secondly, we have also been impacted now in the second half by a warranty topic, which was quite significant as well. So it is partially in the third quarter and will also hit the fourth quarter. So this is a topic which lasts now from the years '22, '23, where now finally, we got to an agreement with -- and the settlement with the customers. So we are close to, but this was an impact as well.

And overall, on the full, let's say, second half, it will have an impact of around EUR 25 million, which is quite significant for the Lighting business. But the overall, let's say, if I look at Lighting, we are -- the business is declining. And this is something which will also continue into the next years and will be a headwind also in the next year before now we see with the momentum we have on the order intake, we will be able to grow again in the -- starting from '27. What I have to say positively is that in lighting, we are very strong in China. So the transformation also we need to do for Europe and specifically also our Mexican operations, we already have done in China and also the adaption to competitiveness. So I see us very strong in Asia today. And now we need to do the work we have -- we need to do in Europe and also South America. So we changed also the responsibility. So I have taken over in combination of tasks now from the 1st of July. And so we are now starting on this transformation program, as I said.

On Electronics, I'm very pleased about how our business is developing also in terms of performance. So what we now see is basically that we see now the payoff of the business now where we see now the growth coming with the launches and the new programs, which are going into serial production. So the growth supports the profit development. And what we as well see is that the structural changes we have done in terms of -- on the cost side helps as well. So with that, we see immediately a very strong profit development. There was no really specific one-off in the third quarter. So -- but it was quite a good quarter. So I wouldn't say now every quarter will be the same. So also no negative impact, I have to say. But I have to admit also, it's a good development, and we are building on that and trying to continuously to improve on that.

On the Nexperia, so I think that -- I stated so far with the coverage or with the stocks we had, with the coverage we had. We also bought some -- quite early on some broker parts. So this helped really to cover the period of time until now. We see now that some shortages on some products, they are already there. On the call offs, basically, you do not see yet that customers are changing anything. But for sure, on the -- in the systems, but for sure, we are in very intensive discussions with all of our customers. And today, the situation is as follows that the weekly -- the decisions are taken now on a weekly base, what can be produced and how much reduction will we see. And I mentioned the next weeks will show reductions. And the magnitude is still not absolutely clear.

So what is in the next, let's say, 3 to 4 weeks. And it certainly will now also depend on how -- are we now able really to get exports on Nexperia parts with these exemptions or with export licenses granted now to the OEMs or to us. And we are already trying out the test shipments and working with MOFCOM and the customs, as I said. So there is some hope that now it should work and that certainly will help a lot immediately. But this is the uncertainty we have. If this is not working, I mentioned it, then the reductions on the volumes in the next weeks will be much higher.

And on the cost side, on the broker so far, I would say, for sure, it goes fast. The last broker -- broker offers I saw between factor 600, factor 800, also factor 1000 I already have seen. The difference to the semi is that the original price is much lower. So there, we are only talking cents, but sure, if we are talking factor 500, 600 or higher, then you talk immediately some millions. So far, it has not such a big impact. The market today is still -- there are not so many volumes any longer in the broker market. So I would not expect that this should have such a hit, which is comparable to the semi today or to the semi crisis we had some years ago. But it's -- again, still we are talking some money. It's some millions we are discussing. That's for sure. But not comparable, as I said, to the semi crisis.

And the next question comes from Sanjay Bhagwani from Citi.

Maybe to begin with, so on the Nexperia situation, this morning, there seems to be several articles suggesting like -- so yes, I mean, on the Nexperia situation, this morning seems to be like several like constructive articles typically like quoting some of these Dutch ministers that things will be okay in the coming weeks and chip supply should resume. Is that providing some comforting messages to you as well? Maybe let's say, if there is a disruption, there can be just 1 week disruption or something like that? Or it's probably too early to look at these headlines or something like that?

So there are 2 things for me. One is does China now allow that Nexperia China -- the parts which are still produced at Nexperia China that we can export these to Europe. And this -- we are still working -- I mentioned it. We are still working on how process-wise, the application and the export needs to be executed. And this is where I said we are now just running now with custom, the discussions we have with MOFCOM doing these test shipments to try out how we have now to handle and practically do it. And there are some signs now. This I can at least also confirm that -- I hope that it will be possible soon. Let's put it like that. Still today, it has not worked out, but we are getting signals that there is hope that it could be possible. So that is one thing. So I would take that as a positive note, but still to be seen if then really it works out. Because just practically, I can tell you the custom were not aware that they are allowed to do.

On the other hand side, MOFCOM is allowing it. So I think we are still, let's say, it's an administrational point, but you never know. So that is one thing. The other thing we are also working on, and this is as well, let's say, a critical path, we are still getting a lot of parts from Nexperia China, and they are dependent still on the wafers they get from Europe. And there apparently, they are not coming along. So that these wafers, which are needed for the further production, if they -- if China do not have any longer wafers from Nexperia Europe, they couldn't continue on their production.

And they will run out at a certain point of time if there is no agreement. And this is the second path we are working on to get a solution between the 2, Nexperia Europe and China, to stabilize the situation so that Nexperia China is able to continue to deliver. And this is important because, as I said, we are working on the alternative suppliers. And for most of the suppliers, it can be -- we can find, let's say, good agreements and to ramp up quick. But for some of the parts, it will take a little longer, and this is why it's important to have a stability on Nexperia China as well.

That's very helpful. And I think on the broker parts, you mentioned that so far, this has not been a major impact. But in terms of the pricing pass-throughs, I understand in the previous like chip crisis, you had to actively go and negotiate the price increases. In this case, is it easy to like kind of have some sort of indexation for these components now? Or this again, will be subject to negotiation if the, let's say, inflation becomes material?

So in the actual situation, because we need to be quick, we take the decision with the customer, so with our customer, with the OEM together. And the agreement is that in terms of who takes which part, we agreed that this will be then discussed later. But it's clear that we will have a comparison as it was in the semi crisis where we agreed on the, I would call it, pain share, who takes which proportion. So you can assume that what we have seen similar in the semi crisis should -- at least from our perspective, should also be true now for this one.

And then my final one is on the Q3 margins. Just a kind of follow-up to Christoph's question, but more at the group level. So Q3 group margins have like sequentially gone down to, I think it's 5.3% versus H1 was 6%. So are you able to provide some color in terms of the Q4? Is it sequentially looking better as of now? And in terms of divisions, how the Q4 versus Q3 margins are looking?

So month of October was okay. It was in plan. So -- and normally, the months, October and November are very strong in the industry. So we have seen quite a good month in October so far, even we had this Nexperia situation. So the month of November will certainly be impacted now. And it's difficult to say on the margin -- so really to say now what does it now mean for the full quarter because it will depend on volumes at the end. And we will lose volumes. The question is how much. So I would not feel so comfortable now to say how it will go. I think in terms of our cost savings, all what we are doing there, we are in plan. At the end, it will depend on sales.

[Operator Instructions] So it looks like there are no further questions at this time. So I would like to turn the conference back over to Bernard Schaferbarthold for any closing remarks.

So thank you to all of you who participated, and thank you to showing the interest on HELLA again. And I wish you a pleasant remaining day and after that, a good weekend. Hope to see you and speak to you soon. Bye-bye.

Good morning, ladies and gentlemen, and welcome to the HELLA Investor Call on the results for the first half year of fiscal year 2025. This call will be hosted by Bernard Schaferbarthold, the CEO; and Philippe Vienney, the CFO of HELLA. [Operator Instructions]

Let me now turn the floor over to your host, Bernard Schaferbarthold.

Very warm welcome to our earnings call for the first half 2025. I'm here together with Philippe, CFO at HELLA and Kerstin Dodel, who is heading Investor Relations. So starting immediately on Page 4 of our presentation. If we look at the key figures and the key achievements in the first half. So looking first on the sales side. So our organic sales are at EUR 4 billion, largely at the previous year level, minus 2.4% (sic) [ 0.4% ] year-on-year. Reported sales are at minus 1.3% with some headwinds, specifically in the second quarter. If we look specifically on our business groups, Lighting was down in the first half, 7.4%. Specifically, the end of larger volume projects were the reason on that sales trend.

Electronics is with the continuous good momentum, growth of 6.6% and now at EUR 1.6 billion on the first half. Specifically, our radar business but as well business related to our Energy Management division is growing quite decent. Lifecycle Solutions was impacted by a weak demand on commercial vehicles. So overall, on the first half year-on-year, down 6.6%.

On a positive note, specifically on our special application business, we are now seeing that the negative trend is now ending, and we are more optimistic in terms of the development on the second half. If we look at our operating income margin, we are largely stable to last year. We are at 6%. Our gross profit is slightly down in comparison to last year with, on one hand side, some negative mix. But in comparison also to last year, where a part of the positive within our gross profit was also related to the sale of our People Sensing business where we recognized EUR 17 million. So the comparable we need to remind on that one as well.

We are working intensively on our costs. So we see with a strict cost discipline and cost reduction, we see a continuous improvement. Our competitiveness program, which we as well accelerated is showing step-by-step strong cost improvements in all areas, but specifically also within our R&D. So we reduced in the first 6 months, head count by around 3.4% overall. So this will now continuously lead also to further cost reductions in the upcoming months.

We also said that within R&D, we were targeting to be below 10%. And we already see that now for the first half of the year that we reached that number. On the net cash flow, we are turning from a negative in Q1 to a good positive momentum now within the second quarter. We ended the first half year with positive number of EUR 114 million, which is an increase of around 34% in comparison to last year.

We have higher funds from operations. We are continuously managing to improve in our CapEx spending. And as well, the factoring, which is within that net cash flow is at EUR 23 million and is a lower amount in comparison to prior year. In terms of our guidance, we are confirming the guidance to the end of the year. We see sales between around EUR 7.6 billion to EUR 8 billion. Our operating income will remain -- or will be between around 5.3% to 6%. And we assume to be at least EUR 200 million of net cash flow to the end of the year.

If we move to the next page, on Page 5, we are quite pleased about the development in our order intake. We were able to win in Lighting important new projects, specifically also in North America, but as well in China with the Chinese OEM. And this should support our growth specifically in these 2 regions. Even more pleased, I'm with a strong development within our Electronics business. We won very important acquisitions on a lot of our new product offerings, specifically if it comes to our Zonal module business and the intelligent power distribution module, which we offer, we were able to win another order. And the same also on the Smart Car access.

And to highlight as well, here on the high-voltage side, we were able to win another big business and as well another one on the Zonal Control Modules with an SOP in 2028. So important acquisitions in terms of new products, we have established into the market and as well important the regional distribution, which we are also targeting, as you know, so that we are more balancing out and getting more resilience also going forward.

Lifecycle Solution is also showing a good trend in terms of order intake. So especially in the important area of trucks, but also buses, we were able to further win businesses and as well outside of Europe, which will also support that trend.

Coming to the next topic on Page 6. So we started with our competitiveness program, specifically on Europe, early 2024, which we announced. And I made the comments that we also accelerate on the measures and add additional measures. What we have, in addition, now launched is the project SIMPLIFY. SIMPLIFY is focusing -- it's a global program, is a program where we also leverage and work together with FORVIA. And the target is really to streamline specifically in all functions and as well the administrative functions, our processes and our organizations and to get leaner, more efficient and less complex.

This program should lead to gross savings of around EUR 80 million until the year 2028, and we will have investments and as well restructuring costs, which will be up to around EUR 100 million. So we believe that this program will bring us into a best-in-class organizational setup in the upcoming years. We did an intensive benchmark to leverage really on the opportunities we still have. We already have started on that program. And we believe that the combination of the competitiveness program for Europe and the activities in SIMPLIFY will significantly improve our competitiveness going forward.

Having said that, I would hand over to Philippe to give more details on the financial results.

Thank you, Bernard, and good morning to all. So yes, looking at the sales, so we reported sales of EUR 4.30 billion, which is 1.3% below last year. In this number, we have a negative impact of EUR 36 million due to exchange rate negative trend versus last year. And we have a volume reduction of EUR 15 million, so 0.4% in terms of organic decrease.

So if we look by BG. So Lighting, we posted sales of EUR 1.8 billion versus more or less EUR 2 billion last year. So it's a 6.8% year-on-year organic decrease. So here, we have some difficult situation in Asia, in China, mostly where we have the Tesla model, Y which is ending in Q1 '25 and which is replaced by the new model, but the ramp-up is only starting, and we have not the full -- the same content either in China, which is also impacting the sales in China.

We have some good ramp-up in Europe, especially on -- with headlamps and rear combination lamps with Volkswagen, for example, in Audi, but not enough to offset the decrease we have observed in Asia. The operating income is at 3.4% versus 3.3% last year. So here, we have relatively good adoption of our fixed cost and our material ratio.

So the gross margin has been kept at a decent level versus last year. And we are also reducing our R&D cost and fixed cost and SG&A, which is also linked to the program, which has already been announced. So leading us to be slightly better than last year in operating income by 10 basis points. For Electronics, so we posted sales of EUR 1.7 billion versus EUR 1.6 billion last year. So it's an organic growth of 7.2%. So here, as said, we are helped a lot by our radar business, especially in Americas, where we have a decent growth, which is above the double-digit growth. We also have some growth in Europe with new programs, but which are not -- which are, let's say, offset by lower electrification in Europe. And we have also a very strong growth in Asia, thanks to the battery management system and car access, which have been taking off in Asia.

Here, the gross margin is still impacted by some write-offs that have been booked, linked to the slow electrification in Europe. But we are offsetting part of it by lower R&D expenses with less use of external resources and also some impact from the cost-cutting plan, which have been announced, which is already visible.

Lifecycle. So we posted EUR 500 million of sales versus EUR 537 million last year and operating income of 10.6% versus 11.7%. So here, for Lifecycle, we are very much impacted in terms of volume on the special application side with the reduction of the market on the commercial vehicle business in the Trailer and Construction.

On the other side, the aftermarket is relatively stable versus last year after FX restatement. So here, we are really suffering from the special application domain, which has also led to a lower gross margin because we are not completely able to offset this volume drop, but still, we are also decreasing our R&D expenses and SG&A, which is favorably impacting Lifecycle.

Looking at the sales per region, Europe. So Europe, our sales are more or less stable, which means an outperformance versus the market of 330 basis points. So here, we -- again, we have the nice development on the radar business on the Electronics and -- but partially offset by the team, again, here with the Tesla model, which is impacting the 3 continents, the ramp down and end of production of the Model Y. And we have also some decrease with some German OEM in Lighting.

For Americas, we are at plus 1.9%, which means an outperformance versus market of 430 basis points. Here, we have also, again, the Electronic radar, which is business which is helping us. And we have also some ramp up in North America with Lighting, especially with GM, partially offsetting, again, the decline with Tesla.

Asia Pacific. Here, we have a decrease of 7.6%. So that's underperformance versus the market. Here, again, we are very much suffering from the Tesla business in Lighting, which is going down. And on the other side, we have some growing sales with the battery management system in Electronics. So looking at the P&L. So again, sales going down by 1.4%. The gross profit is at 23.1% versus 24.1% last year. So here, we have the lower gross profit, which is also linked to, as I said, to electronic with some lower R&D margin and also some write-offs, which have been booked in Electronic.

Lighting and Lifecycle are showing slight improvement on the gross margin level. The R&D, we are at 9.6% versus 10.4% last year in H1. So we are below the 10% we wanted to reach. On the SG&A, we are also seeing some reduction, which is in line with the sales at 1.5%. If I take only the administration cost, we are down by 6%, so EUR 10 million less than last year.

So here on R&D and SG&A, we again see the benefit of the cost-cutting program, which has been launched, leading us to an operating income of 6% versus 6.2% last year. On the EBIT, we are at EUR 138 million versus EUR 317 million last year. So here, we have on the nonrecurring OI minus EUR 95 million booked, which is mostly represented by the restructuring costs, which have been booked in H1 '25. And for last year in H1 '24, I need to remind that we had the benefit of the capital gain on the BHTC sales, which was booked in H1 last year.

On the net cash flow. So we have posted EUR 114 million of net cash flow versus EUR 86 million last year. So it's an increase of EUR 29 million. So here again, we have an increase of the EBITDA versus last year, which is helping us. And we have also good momentum on the CapEx, which have been reduced. You can see the CapEx has been reduced by 15% versus last year.

So we are starting to see the monitoring and the control on the CapEx we want to have, which is benefiting to our net cash flow. With that, I would end the financial presentation and over to Bernard again for the outlook.

Yes. Thank you, Philippe. And if we come to the outlook, then on Page 16, the view on the market. So we assume similar to IHS that the market should be around 90 million cars this year, which is very comparable to last year, a slight increase with a continuous downward trend in Europe and as well in the Americas and still a positive growth for Asia Pacific coming especially also out of China.

On Page 17, again, our outlook. So we -- we still see, as I said, sales around EUR 7.6 billion and EUR 8 billion. We had EUR 4 billion at the first half. So we are quite confident really on that range as of today, also looking at the current trading. The operating income margin between 5.3% and 6% having been at 6%. We are well on track on this as well. And as I said, net cash flow of at least EUR 200 million.

So to sum it up on Page 19. So first, we look at H1. Overall, in our view, a solid performance. We are on track also to our own expectations. The market was demanding with a lot of uncertainties. So we are working very focused on continuing on our structural and performance measures where basically, we already see, as I said, that step-by-step, we are -- it pays off, and we see our cost structure going down.

And on the order intake side, especially on the Electronics side, we were able to win very strong businesses, which should support our growth path also in the upcoming years. We, as I said, confirm our outlook. And still, we see that H2 will remain very dynamic and with a lot of uncertainties. But as of today, we see that the positive trend in terms of our sales evolution is continuing, so that we feel confident in terms of the outlook we have given.

And lastly, as I said, on the competitiveness program, we are well on track. We are accelerating on the measures. We are adding measures also to further streamline our structures. We added and started the new project SIMPLIFY to improve the processes and the organizational structure, specifically on all corporate functions, supporting functions overall. And as I said, it's a global program, and we anticipate a saving of around EUR 80 million until 2028.

So having said that, we are happy to take your questions.

[Operator Instructions] The first questions come from Sanjay Bhagwani.

My first one is on the FY guidance. When I look at the first half, and if I just bake into your commentary that you are still seeing the positive valuation in sales is continuing. Then you are -- it seems like you normally are trending towards the upper end of the guidance range for both sales and margins. And usually, H2 margins tend to be higher because of the R&D reimbursements and stuff like that. So are you able to provide some color? How you feel about H2 margins? And in that context, do you think the guidance probably more towards the upper end of the range is achievable or not? Or what could be the other factors which could -- which you think could be the headwinds? That's my first question.

Sanjay. So you're right, normally on the sales, at least if I look also at HELLA in the last years, it's very comparable in the second half of the year to the first half. So if you take basically history, then it brings us automatically to the upper end. And with that, we would also be confident to be in the upper range of our OI margin. So this, I think, is a fair view on it. It remains, let's say, what is basically the risk for us, still, it remains uncertain how demand will continue.

And with all uncertainties we have in the market, specifically also with -- on the tariff side, I think we remain somehow a little cautious. So still, I would say we do not see that in the demands of our customers, that there is -- as I said, we see still the demand quite good. No big changes. But also, we want to see how now when it is after the summer break. Do we then see some changes also on the OEM side? We are not anticipating that, but we know how dynamic the market actually is. And this is why we are a little more cautious in our tone. But it's a fair view you have.

And so my second one is on the Electronics. So the gross margin decline in H1, I think you mentioned it's partially because of the Electronics. And I think you mentioned some write-offs. Could you please maybe provide some more color on that? Because yesterday, like one of your peers reported, and their gross margin increase was driven by material cost improvement and electronic costs. So just trying to reconcile what this write-off pertain to? And if you are also seeing any tailwinds from the Electronic cost deflation?

Yes. So if you do the year-on-year comparison, first, the comment I did last year, we sold a small business. It was an asset deal, so our People Sensing business. And this was a EUR 17 million gain, which was in the gross profit last year. So this is the first element if you really compare both.

And secondly, as we had one program, which was -- which -- where we had a significantly lower volumes. And there, because of these volumes, we have written off the equipment related to that with an extraordinary write-off, which Philippe mentioned. And this was in the first quarter where we took EUR 10 million into the gross profit as a negative. So this is basically the main change. If we look other than that on our target if it comes really to material cost reduction, I said that we are looking at around 4% of material cost reduction overall we are targeting. And we are well on track on that number now. And we also assume now for the second half that this will continue.

And then just a final one. I know it's probably a lot a bit early for the Q3, but are you seeing the Q3 margin holding up same level as the Q2 or improving? Any indication there will be very helpful.

So it's -- as you said, it's a little early. It depends a little bit. So normally, from a sales perspective, because of the summer break, it is slightly lower sales overall. So the third quarter is normally one of our weakest, also if we look at the previous years. But we do not anticipate that we should be also in comparable of last year, there should be a significant deviation to last year. So it should be around that area.

And is it the same for the margins?

Yes.

At the moment, there seem to be no further questions. [Operator Instructions] We're going to give you a couple of more seconds to state your question if you want to. That seems not to be the case, which is fine. I would like to hand over once again to the management for some final words.

Yes. Thank you very much to show interest in HELLA and in our earnings call. And thank you for joining, and I wish you a very pleasant day and hope to hear you or see you soon. Bye-bye.