Release Date: November 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- HELLA GmbH & Co KGaA (HLKHF, Financial) confirmed its outlook for the end of the year, indicating confidence in its strategic direction.
- The company reported a solid profitability despite a challenging and volatile market environment.
- Sales in the lighting segment grew by 4.3%, reaching EUR 2.95 billion, showcasing strong performance in this area.
- HELLA GmbH & Co KGaA is successfully expanding its global footprint, with two-thirds of its order intake coming from outside Europe.
- The company is making significant progress in cost reduction and operational excellence, expecting to achieve EUR 400 million in cost synergies by the end of next year.
Negative Points
- Overall sales growth was modest at 0.8%, with total sales reaching EUR 6 billion after nine months.
- The electronics segment experienced a negative growth of 3.2%, largely due to delayed SOPs and a downturn in electrification.
- The life cycle segment saw a decline, particularly in the third quarter, with a significant drop in the SOE business by 20%.
- The income margin decreased to 5.8% from 6.1% in the prior year, impacted by lower volumes and negative mix effects.
- Net cash flow remained slightly negative, with expectations to improve by the end of the year.
Q & A Highlights
Q: The first question is about the weak performance in the Life Cycle segment in Q3. Do you expect any changes in this trend for Q4, and how do you see production volumes and trading in various regions?
A: Unfortunately, the trend in the SOE segment remains the same in Q4 as it was in Q3, impacting the Life Cycle segment. The independent aftermarket is stable, while workshop products are slightly negative compared to last year. Production volumes in October were slightly lower than expected, and there is a risk that December could also be lower. Regionally, Europe is most impacted, while China and the Americas remain stable.
Q: If you approach the lower end of your top-line guidance, will it affect your margin, or do cost-cutting measures help you stay closer to the midpoint?
A: We are improving on the cost side and accelerating cost savings. We aim to reach the midpoint, but it depends on sales. We do not expect to fall below the range, but the midpoint would be the best-case scenario.
Q: Regarding self-help actions and cost measures, what net positive impact should we expect for 2025 compared to 2024? Also, how should we think about net CapEx and the electronics business affected by delayed SOPs?
A: We expect to reduce the fixed cost base in absolute terms next year, with a 2-3% decrease in fixed costs. Material cost reductions will benefit from synergy efforts. Tangible CapEx will be below 90% of depreciation, and we expect electrification volumes to increase, benefiting the electronics business.
Q: Can you discuss client discussions regarding sharing savings from restructuring actions and the risk of strikes and salary negotiations in Germany?
A: Discussions with clients are intense, focusing on inflation and volume compensation. We aim for win-win agreements. On the union side, there is an understanding of market difficulties, and negotiations are ongoing. We hope for a reasonable solution, and we have priced in lower volumes from VW in our outlook.
Q: Are there any potential disposals planned to limit the debt burden?
A: There are no major business disposals planned at this time. We continuously review our portfolio for competitiveness, but there is nothing specific to comment on currently.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
