Ladies and gentlemen, welcome to the Continental AG Analyst and Investor Call Full Year Results 2022. At our customer's request, this conference will be recorded. At this time, all participants have been placed on a listen-only mode. The floor will be open for your questions following the presentation. Let me now turn the floor over to Anna Fischer, who will lead you through this conference. Please go ahead, madam. Thank you, Beatrix. Welcome everyone to our fiscal 2022 results presentation. Today's call is hosted by our CEO, Nikolai Setzer, and by our CFO, Katja Dürrfeld. Small reminder that both the press release and the presentation of today's call are available for download on our investor relations website. Before starting, we'd like to remind everyone that this conference call is for investors and analysts only. If you do not belong either of these groups, please kindly disconnect now. Let me walk you through today's agenda on slide two. Niko will start with our business highlights. Katja will review financial highlights for 2022 and close with our expectations for 2023. Following the presentation, we will conduct a question and answer session for sell-side analysts. To provide a chance for all to ask questions, we would kindly ask you to limit yourself to no more than three questions. This will help us conclude our call on time. With that, let me now hand over to you, Niko. Thank you, Anna. Welcome to everybody, and let's jump into the topic and let's begin on slide three. Most of the KPIs you see will be already known as we have pre-released on January 17th. I think it's not necessary to read through each number. However, the most important ones I like to discuss and describe. Overall, in group level, we came out at EUR 39.4 billion, and the adjusted EBIT margin was 5.0%. Special efforts of more than EUR 1 billion are predominantly non-cash postings, mainly resulting from goodwill as well as property, plant, and equipment impairments, consequence of interest rate hikes used in the valuation. We have also impaired all of the intangible as well as property, plant, and equipment assets in Russia. These are all the burdens to the net income, which ultimately amounts to EUR 67 million. Adjusted free cash flow with EUR 200 million was significantly lower than our expectations. This is due to particularly delayed collection of account receivables as per the reporting date, as well as high inventory levels still weighing heavily on working capital. Fiscal 2022 was dominated by high inflation in all sectors, which led to price negotiations as well with all customers. Our main objective was to achieve sustainable and fair compensation for our products, services, and solutions by reflecting this inflation in new prices agreed with our customers. Looking back, we can say that this process was concluded to our satisfaction in all sectors. The results of those negotiations are clearly reflected in the financial year's sales and earnings. Overall, we achieved a strong organic growth of 12.3%. FX impact on top line was 4.5%. In Automotive, we were able to outperform the market by around 10%. We see this later on as well. Sales weighted with our sales, Katja will refer more to that. This strong outperformance is also attributable to a significant improvement of our product mix, a higher content per vehicle, as well as a strong demand for our high technology products. Another highlight in Automotive certainly was the strong order intake, EUR 23.4 billion, 26% higher than in 2021, which will secure profitable growth in the next years going forward. As one way of addressing portfolio measures, which we have always mentioned, we consider partnerships as enormously important, in particular in our growth areas. We are pleased to have entered the strategic partnership with Ambarella to jointly develop full-stack software and hardware system solutions for both assistants as well as the higher levels, the automotive driving levels. As to our latest financing activity, if it's worth mentioning, that in November 2022, we issued a new Eurobond on favorable terms. Continental is known for its strong balance sheet and solid financing structure, and this is yet another proof of it. Overall indebtedness increased at year-end, reflection of higher working capital as already mentioned. Reliable long-term refinancing is not an issue and reflects high appetite as well as the trust of debt investors in Continental. Our gearing ratio at 32.8 is in line with our target ratio and increased even slightly from last year. Looking ahead, 2023 will bring along some tailwinds, Katja will talk about this later. We see the situation relaxing in some areas, at least certain raw material prices decreasing, for example. However, overall, we expect further inflationary headwinds in 2023 impacting all three sectors, in particular Automotive again. Therefore, our focus in 2023 is again on price negotiations with all our customers. For tires replacement business, we are observing the markets very carefully, and we will not hesitate to increase prices as well where necessary and possible. Essential pillars of our 2023 program for success are the improvement of our operational performance of our R&D efficiency in Automotive and continuing the strict cost control in all areas, basically. The rigorous execution of our structured program is key as well, and of course, we will work on the further stabilization of our supply chains. Smart inventory management means aiming for minimum unit levels while still securing the supply of our critical components. Above all, we will continue to put our people first, looking to retain the incredible team we have while attracting, at the same time, new talents to support us to achieve our goals. Moving to Slide four, looking for the tire highlights. Here you see the progress we made in the last fiscal year as well as in the years before. Starting with the chart on the left side, this shows our significant growth for our EV tire business. We are now qualified to be fitted for more than 400 different homologations. About a year ago, we counted around 300, so we made significant progress. Another 100 which we added, and we are proud of. From the 10 largest global EV manufacturers, and I guess they are all well-known, nine of them rely on our high-quality products. On the broader stage, the vast majority of OEMs choose Continental tires for their EVs too. Given increasing requirements in this area, the growing homologations show the trust that these customers place in our technologies, which we are consistently developing further. On the right-hand chart, you can see the two further drivers of our mix improvement. One is the ongoing expansion of ultra-high performance tires in our passenger light truck tire mix, whose growing share of sales has well outpaced unit growth, demonstrating the overall proportional growth contribution from ultra-high performance tires. This relates to all brands. For our Continental Brand tires, the share developed even more significantly from 52% to 56% of PAT sales, so much higher than in the overall. Contributing to mix are cutting-edge technologies. You see them, the three underneath, ContiSilent and ContiSeal, for example, as well as in the middle, advanced compounds for increased mileage. Coming to the next point, dividend. Before we are turning to the financial performance, let me address our proposal, here. In principle, we are committed to distributing a dividend commensurate to the development of our net income. Our dividend policy is to pay out between 15% and 30%, 30% of net income attributable to the shareholders of the parent. This remains valid generally. However, periods which are atypical require a different decision, and we are not afraid to apply when we see it fit a more appropriate approach. As said before, fiscal 2022 was burdened by high non-cash effects in the net income. In a simplified way, let me call them accounting effects driven by interest rates hikes as well as impairment losses on assets in Russia. Also, considering a total shareholder return view with the share price under pressure, particularly last year, we propose a dividend of EUR 1.50 for fiscal 2022. This will be subject to approval by the annual shareholder meeting end of April. With this, I would like to hand over to Katja for the financial review. Yeah. Thank you, Nico. Also a warm welcome from my side. Let me now first move on to the Q4 performance by group sector on slide six. In Automotive, we see a strong increase of 17.9% in the year-on-year organic sales and margin improved by 570 basis points to 2.1%. Both effects, of course, were strongly supported by the price agreements concluded in 2022 and to a small extent from newly signed contracts which we have a retroactive effect to January 1st, 2022. In Tires, organic growth of 12.3% mainly reflects again the strong price mix in the replacement sector. The adjusted EBIT margin decreased by 70 basis points to 10.3%. Positive effects in the top line were unfortunately countered by lower volumes and higher inflation effects in Q4. At ContiTech, the organic growth of 12.1% also reflects positive effects from price agreements, especially with automotive OEM. Adjusted EBIT decreased by 340 basis points to 2.3%. Continuing with the review Automotive Q4 sales and adjusted EBIT on slide seven. Automotive sales totaled EUR 4.8 billion. The impact from FX was positive 3.5%. Key drivers for the strong organic growth as well as the adjusted EBIT margin of 2.1% were new price agreements in place, higher volume as well as higher content per vehicle. Inflation headwinds totaled more than EUR 100 million. For the Q4 standalone, Autonomous Mobility reported sales totaled to approximately EUR 0.5 billion and showed an organic growth of 21.2%. This was mainly driven by stronger demand in long and short-term range radars as well as front cameras. Safety and Motion reported sales totaled around EUR 1.8 billion and showed an organic growth of 15.2%. Strong demand in our new braking system generations and sensors business confirmed we are on the right track. The new business areas, Architecture and Networking, Smart Mobility and User Experience, reported sales totaled around EUR 2.5 billion and showed an organic growth of 19.4%. Sales were mainly supported by stronger volumes in the area of connectivity products as well as digital clusters and display solutions. On slide eight, for a better understanding of current profitability within Automotive, I will break down sales and adjusted EBIT for fiscal 2022 by section. Let's start on the right side of this slide with the figures for fiscal 2022. For 2022, overall Automotive sales sum up to EUR 18.3 billion, with an organic growth of 13.9%. Adjusted EBIT margin is -0.2%. Our largest action field, Safety and Motion, with reported sales totaling to EUR 6.8 billion and an organic growth of 12.1%, also makes the largest positive contribution to adjusted EBIT at EUR 164 million. Adjusted EBIT margin is 2.4%. Smart Mobility is contributing with sales totaling EUR 2.4 billion, an organic growth of 4.3%, and an adjusted EBIT margin of 3.6%. User Experience reported sales totaling EUR 3.7 billion and shows an organic growth of 12.5%. Adjusted EBIT margin is 0.4%. Architecture and Networking and Autonomous Mobility are operating in growth areas of future technology. Both show a strong organic growth of 23.4% and 19.3% respectively, and we expect them to positively contribute to EBIT in future. Currently, their result is burdened by the DNA of this new and transformative business. In particular, the new technologies require quite high pre-investments, while economies of scale are ramping up. Therefore, our absolute focus here is to significantly improve our R&D efficiency and secure the volumes for the future through further strong order intake. It is our belief that these growth businesses will be drivers for future outperformance. Let me now review organic sales performance for Automotive versus regional vehicle production in Q4 on slide nine. Segmented by region, Automotive organic growth was able to outperform vehicle production again significantly in our European market as well as in China. Our organic growth in North America in Q4 was only slightly above local vehicle production, what is mainly due to the customer mix in this region. Overall, in Q4, Automotive outperformed its regionally weighted average by around 13 percentage points, which is a noticeable amount. The strong outperformance was again mainly driven by the significant effects from increased customer pricing. Other than in previous quarters, there were no significant retroactive effects in Q4. Furthermore, we were able to further increase the content per vehicle. Now turning to slide 10, let us have a look at our cumulative outperformance for entire fiscal 2022. European market shows a very strong outperformance, and so does China. North America is outperforming, too, but just slightly. Overall, Automotive outgrew its regionally weighted average by around 10 percentage points. On slide 11, we see again a very pleasing total order intake at Automotive of more than EUR 5 billion lifetime sales. For Safety and Motion, we achieved an order intake of EUR 3.1 billion lifetime sales. We report here major business wins for brake systems MK C1 and MK C2. Our business area Architecture & Networking, Smart Mobility and User Experience continued the success story and showed also in the Q4 a noticeable order intake of EUR 1.4 billion. The biggest wins were related to an order for L-shaped display solution and orders for light control units. Autonomous Mobility achieved an order intake of EUR 0.9 billion in Q4, adding business in nearly all sensor categories and an additional system support, including a computing unit. Moving from Automotive to Tires on slide 12. Despite the, as expected, difficult market environment and a significant decline in volumes of -6.8%, Tires was able to increase sales by 15.7% to EUR 3.7 billion. Price mix show a very pleasing and an outstanding performance of 19.1%. This more than compensated for the inflation in Q4. Moving on to ContiTech on slide 13. Despite a decrease in volumes in the industrial and aftermarket business, ContiTech showed a solid organic growth of 12.1%, mainly supported by price effects with industrial and aftermarket, as well as Automotive OEM customers. The profitability of the period was clearly under our ambitions, being highly impacted by higher production costs. While demand increased on the Automotive side of the business, we experienced decreasing volumes on the Industry side. ContiTech's fragmented footprint offered few opportunities to immediately and locally substitute workforce, which was insufficient in the auto plants while having to deal with overcapacities in the Industry part. ContiTech also experienced increased sickness rates in general, and particularly in locations under restructuring in high-cost countries. COVID-related business restrictions in China and high energy costs in the quarter were an additional headwind. With a high labor content and a strong footprint in Germany, one-time payments negotiated with unions weighed over proportionally on the EBIT too. Let me now continue with the overview of free cash flow for full year 2022 on slide 14. The main driver for the decrease of the operating cash flow from EUR 2.5 billion to EUR 2.3 billion, were strong working capital headwinds from high accounts receivables as a result of delayed cash inflows from our customers at the end of this year. Inventories continue to stay at a high level as a combination of securing supply chain and higher prices per unit. The investing cash flow of negative EUR 2.2 billion was mainly influenced by high capital expenditure on property, plant, and equipment, and software in all sectors. For example, we increased investments in User Experience to expand capacities demanded by the high order intake. As announced, we continue to further increase capacity in the tire segment, mainly in North America for truck tires and in China for PLT tires. Also, the enhancement of ultra-high performance capacity in EMEA and for ultra-high performance and light truck in North America remains a focus topic. On slide 15, our expectations are based on currently foreseeable effects. Given this assumption, we are anticipating a year-on-year increase in light vehicle production of 2%-4%. For passenger car replacement tires, we expect demand to be up from +1% to +3%, with the demand being set in Europe without Russia and North America, with a rebound in the Chinese market after the COVID-19 related disruptions in 2022. For the industrial production, we expect volumes to stay flat in the eurozone, become slightly negative in USA and clearly positive in China. Let me turn now to our outlook on slide 16. Here you see, as usual, our outlook KPIs for 2023. I'm sure that this is the main point of interest today. Sales increase to around EUR 42 billion-EUR 45 billion are driven by higher volumes, outperformance, but also by inflationary headwinds, which are expected to add up to around EUR 1.7 billion on group level. For 2023, main reasons are still in material, particularly in electronic components, continue at lower levels than previous year in energy and logistics. A new element which needs to be mentioned, not just here, but also in our negotiations with our customers, will be labor-driven inflation. On group level, we anticipate an adjusted EBIT of around 5.5%-6.5%. Our prognosis for adjusted free cash flow is between EUR 800 million and EUR 1.2 billion. I am now on slide 17. We expect volume growth in all our underlying markets, and we will outperform the market in all group sectors. Driven by further sustainable price adjustments, the ramp-up of new product lines and a higher content per vehicle, we expect Automotive sales to substantially outperform light vehicle production. We also expect Tires to record sizable outperformance, predominantly from continued optimization of price and mix. Moving on to the EBIT bridge on slide 18. Starting with Automotive, the increase in the global vehicle production, the ramp-up of new product lines with higher profitability, and the enhancement of our operational performance, for example, from R&D efficiencies and our structural program, will support a year-on-year improvement in EBIT. Inflation of around EUR 1 billion will be a headwind again. As in 2022, we have started negotiations with our customers with the aim to pass on as much of that inflation as possible. Altogether, we expect Automotive margins to further significantly improve towards our midterm targets and at the end of the year amount to between 2% and 3%. In Tires, positive market developments as well as a solid price mix will support the adjusted EBIT margin. Inflationary headwinds of around EUR 400 million are mainly driven by higher labor costs, a further increase in freight costs, as well as some energy costs. We don't predict an increase of cost for raw materials, but it's too early to say that there could be a tailwind. Based on these assumptions, we expect a year-on-year stable tire margin between 12% and 13%. At ContiTech, the improvement in adjusted EBIT is also supported by market development, outperformance, focus on the industry business and now in focus, operational performance improvement. Inflationary effects should add up to around EUR 300 million. Based on this, we are predicting ContiTech's margins for 2022 to be between 6% and 7%. Continuing to our expectations of cash flow on slide 19. There are many moving parts when we look at our operating cash flow. The year-on-year improvement in EBIT will be a positive. The optimization of our working capital, supported by our smart inventory management and assuming high timely cash inflows for receivables, will support improvement of the operating cash flow. For our restructuring program, we expect a cash out of around EUR 200 million, which will be about EUR 100 million less than fiscal 2022. Investing cash flow, we expect capital expenditures of around 6% of sales. As in 2022, automotive investments are mainly driven by the high order intake, as well as by new top technology products which require a higher production automation level. Tires, we will invest to further extend our capacities, for example, in China and North America, as well as tooling for further mix enhancements. In ContiTech, we will focus on investments for the industrial and aftermarket businesses. In total, we expect group free cash flow before acquisitions and divestments to be between EUR 0.8 billion and EUR 1.2 billion. With this, I would like to end today's presentation. Niko and I will now be available for your questions. Operator, could you please open the line? Yes, of course. Thank you very much. Ladies and gentlemen, if you would like to ask a question, please press nine and the star key on your telephone keypad. In case you wish to withdraw your question, please press nine and star again. Please press nine and star to register for a question. The first in the line is Jose Asumendi from JPMorgan. Over to you. Thank you very much. It's Jose from JPMorgan. Very kind. I wanted to ask, please, and thank you for the incremental split we have now by division within the automotive within the automotive division. You have a, you know, 2%-3% margin guidance for 2023. I would love to understand a bit better in these five subdivisions that we have, how do we project 2023? Which divisions do you think will be clearly in the positive? Which ones do you think will be more in the breakeven or maybe you know, slightly loss-making? What are the, maybe the biggest highlights or the biggest drivers of the profitability across these subdivisions? Thank you. Let me take the question, Jose. First of all, I would like to remind you that in general, we do only guide on automotive level, yeah. We said that we give you profit indications from time to time to make sure that you're able to fill your models. In general, we do only give guidance on the automotive sector itself. When you look at the presentation that we have, that we have shared with you do see that we have three main drivers for the improvement of operational performance in automotive. The one driver is the pure volume driver, which comes from the market that we expect to be between 2% and 4%. The second pillar of our success in 2023 will be the outperformance. We, I think we indicated quite clearly how strong the outperformance in the automotive sector was in 2022 beyond pure market growth or production volume growth. The third pillar is for sure the operational improvements that we are expecting to achieve during the course of this year. There we do see multiple contributors to it or different contributors to it. The one contributor is for sure our R&D Excellence Program, of which we have started in 2022, which already had some minor effects in 2022, but will come to more effects in 2023. A second pillar is the contribution from our Transformation 2019–2029, where we also expect more positive contribution. The third is the pure improvement of operational performance, which consists also of different pillars. One topic is due to our higher working capital, we expect to smoothen and stabilize our supply chain, which will help us to reduce special impacts on our plant's performance and also to reduce the necessity of special freights, for example, to either supply our plants or supply our customers. All these three elements will play a role when we talk about the improvement of the automotive business. That's brilliant. I have one quick follow-up, please. Nico, can you comment a little bit around the business opportunity of bringing in Ambarella as a partner into the business? Have you started to book orders on the back of this partnership? Thank you. Was Ambarella the question? Ambarella. Okay. All right. Good. The base of this question, I mean, look, we have a strong knowledge on the sensor suite. We have a strong knowledge since decades as well on integrating on automotive assisted driving, whereas Ambarella is very strong on the one side, on the chip side, system on a chip, which we are already integrating our products, but at the same time, with their artificial intelligence and their environmental model, we are compiling a full stack approach. This full stack is as well open for the OEMs to add functionalities which are developed for them or others. That is the target of our strategic partnership. It took already off speed. We are discussing now with several OEMs in which direction they wanna go, and we will report once we are going further, how successful we have been with those specific applications than for the OEMs as we speak. It's foreseen, if it takes off then to have first applications in the market 2026. That's the horizon which you have to look at. Thank you very much. Next up is George Galliers-Pratt from Goldman Sachs. Over to you. Thanks for taking my questions. The first question I had was just a clarification in terms of how much recoveries are assumed in the guidance for this year. Is your assumption around ability to cover inflationary costs? Confirmed already with your OEM partners. The second question I had was with regards to free cash flow. Obviously you did mention high levels of inventory and receivables weighing on working capital and free cash flow at the end of 2022. What are you expecting in terms of the reversal of working capital in your free cash flow guidance for 2023? Thank you. Okay. Let me maybe talk about the recovery of the inflationary effects in 2022 first. In 2022, we did not say anything about the specific recovery of the inflationary effect. We always said that we aim to recover as much as we were able to do. And from today's perspective, I would say that we are satisfied with the achievements that we have made in all our areas and in the sectors. When talking about the free cash flow expectations for 2023, we also said that we have taken conscious decisions to increase inventory levels, not only short-term, but also mid-term, to secure supply chains and make sure that we are able to deliver to our customers what they expect us to provide. We have implemented a program last year, the smart inventory program and the end-to-end business process management, to really make sure that we align demand from our customers with the delivery possibilities and potentials on the supplier side early enough in the process. In general, we do expect to keep higher inventory levels than what you have seen in the past in Continental. There is a second effect on this and the cash flow, and this also comes from additional price effects. The additional inflationary effects will also have an impact on the inventory levels. Last year, the effects on the inventory level composed of three different elements. That was one, the pure increase in volume. The second was the pricing. That was really significant. You all know what we guided for with regards to inflationary headwinds from materials, and the third one was FX. We do expect to have additional inflation of around EUR 1 billion in automotive this year, and part of that is also attributed to especially electronic component prices. Thank you. Next up is Michael Cluck from the Bank of America. Hi, good afternoon. Thanks for taking my questions. I have two, both on costs. The first one, just in terms of the cost guide, could you perhaps provide a little bit more granularity on the building blocks for the EUR 1 billion cost inflation guide in the automotive business? As part of the cost guide, is it fair to assume then that you've not factored in any raw material tailwinds into this guide or the tire cost guide? My second question is just separately on logistics costs. Given the sharp decline in sea freight rates, and I would imagine a lower need for special freights, why would this line item not provide a tailwind at some point in 2023? Thank you. Okay. Let me first talk about the building blocks for the cost inflation. We don't break it down in detail, but if you want to understand what is comprised in there. In general, this again comprises headwinds from materials, especially from the electronic components. It also includes to a certain extent, higher energy and logistics costs. It also, and this is what we mentioned specifically, includes higher costs for wages and salaries across the world. That was your first question. I think the second question you had was why we have not included tailwinds into the tires guidance or if we have included tailwinds into the tires guidance. Is that correct? Mm-hmm. Yeah, just from logistics costs mainly. Yeah. I would say that logistics costs have improved compared to the highest peak levels in last year, but they also did not start at the beginning of the year at the highest peak levels so far. You do see a quite different distribution from here region to region and also different developments there in the pricing in general. Plus, there is a drop in sea freights, which we do see in the one or the other arena. When you look at the land freight and transportation, there you don't see as much of a relief as you currently might anticipate. Understood. Thank you. Then just to clarify on the raw material side, you're not factoring in any tailwinds into the guide for tires this year? Not significantly, no. Understood. Thank you very much. The next questioner is Thomas Besson from Kepler Cheuvreux. Thank you very much. I'll have three questions as well, please. I'd like to come back to Joe's question on the free cash flow. I mean, is it fair to assume that either in 2023 or in 2024, you should be recovering a substantial amount of working capital because these inventories you've built for the short and mid-term for your customers, you should be able to reduce over time as the supply of semiconductors becomes more normal and your customers production normalize as well? That's the first question. The second question on tires. Can you talk about your winter tire volumes in 2022, how they've changed versus 2021? We've now had five consecutive soft winters in Europe, and there seems to be still inventories in the distribution channels, so we seem to be going into a sixth soft winter tire season. Can you talk about the evolution of winter tires contribution to tire earnings and how much that accounted for the decline in profitability in the tire business? Lastly, on the automotive business, two of your businesses are effectively probably looking more at future products. You've mentioned that they suffer from high depreciation costs. One of them in particular has seen a substantial organic growth, but at the same time, a more doubling of its losses. Can you just help us understanding whether this specific business will find a, kind of a floor, in terms of profitability, in Autonomous Mobility in 2023, or whether we haven't seen the low point yet? Okay, let me see. Let me start with the free cash flow question first, Thomas. I think, in general, you are right that the inventory levels that we have seen for 2022 were significantly higher than we had them in the past. Nevertheless, I would like to mention that some of this level is especially requested and contracted from, and with our customers. There are special requests to hold more inventory on the midterm than what we had in the past. If you look at the past, Thomas, you do see that Continental probably had the lowest inventory levels and the highest turn rates, and this is also why the semiconductor shortage in some areas hit us over proportionally compared to maybe some of our competitors. In general, there's a request from our customers to increase safety stocks in this business. Also, when you look at our expectations for the semiconductor supply situation, you do see that for 2023 and also for 2024, we still expect effects from shortages. We expect improvements overall during the course of this time, but we do not expect to come back to, let's say, totally normal levels before 2025. This also is the reason why we will not return to working capital as we had it in the past. That was the one question. The second question was about the winter tires. Yeah. Maybe I add there something. Yes, winter tire business was only decent in 2022, so it has shown as well weaker market and a certain shortage at the customers. However, we see as well a tendency in particular in those markets with not that strong winters, that the all-season area as well for our product is increasing. We have a compensation to a certain extent from the winter side to high performance all-season tires, where we are well, very well-positioned. Which means to the last latter part of your question, how much contribution has the winter tires to our portfolio? It's getting less and less. With our growth in all-season, with the growth we have seen before, as well in certain markets such as the Americas and as well Asia coming, the portion of winter tires, and therefore the dependence on the profit line is getting reduced. However, we watch obviously closely the markets and the stocks, but we are not concerned getting out of 2022 that we have here, something like legacy, which we will see in 2023. To the last point, you asked in the portfolio, I guess to the two growth fields within automotive Architecture and Networking and Autonomous Mobility, which have been a negative territory as well, 2022. I mean, on Architecture and Networking, you have seen this is the area which was hardest hit by the transformation software-defined vehicle and changes to centralized compute. We are further working there and have structured this area, combined all high-performance compute in this area, have it straightened out to product lines and performing here. With synergies, you've seen that we improved already our results there. We had a strong growth last year, 23% organic. That was even the strongest one, which we see here. Via growth and all the factors which Katja mentioned before, we are working further in order to improve our margin. On the Autonomous Mobility side, you see we basically deteriorated by EUR 100 million, whereas the year before we have mentioned as well before going into the year that we invest further in this area because I referred before to Ambarella, but you've seen as well some other order intake which we took in last year and which we are still working on to grow in the future. That's why we are investing. In total, we set a special budget of EUR 200 million. This was EUR 100 million more last year than the year before, which we are spending in partnerships, which we are spending on the R&D side, becoming full stack and full system provider. You see that this delta is exactly the profitability which we were reduced from 2021 to 2022. The rest was stable on the grow, you know, with a relatively second largest growth which we have in this area, 19%. Still here, the focus is on executing the growth opportunities which we have, while over time improving as well the profitability level more at the longer term than in the value segments such as our safety business, SAM, or on the UX side. Thank you very much, both of you. The next question comes from Tim Rokossa from Deutsche Bank. Yeah. Hi, Nico. Hi, Katja. Thank you for taking my questions. Katja, as you rightly predicted, the guidance is indeed the main point of interest to most people today, I think. When we think about in particular how important volume is versus your own execution, I have two questions on that. The first one would be, you've been quite optimistic on your cost initiatives over the past years already, without us really seeing a potential, a real positive net effect from them. Why are you so confident that we're gonna see that in the EBIT bridge this year? Is it simply because more time has passed now and you're further along in all of these? Projects or have you really started new ones, become more aggressive on certain assumptions? Secondly, a big impact in the past was also that you had very negative contracts in there. To one of the earlier questions as a follow-up to that, I think, Jose wanted to know that basically. Have you managed to price out some of these very negative contracts and really reprice them with your customers? Does that reflect quite a bit of the improved earnings potential that you see there? Finally, Nico, I'm sure you were up in Wolfsburg discussing with VW, on their relatively positive unit sales growth expectations for this year. Now, VW, we all know, has been in the past very often way too optimistic on that assumption. Obviously they need your backing as one of their key suppliers globally. Would you be prepared, or are you even expecting that some of your major customers can grow well into the double digits this year? Does that reflect the outperformance that you're seeing from a market positioning as well? As a follow-up to that, when you have these discussions, I spent quite a bit of time with the CFOs of your key customers lately. They are not very confident that you will be able to get any of the labor cost inflation back from them because they say those are management decisions. You can just move to best cost countries. What makes you so optimistic that on that side you will be successful as well? Thank you. Well, Tim, that was a long question, or these were quite a couple- More than three. -of questions. More than... Well, very comprehensive one. Let me, let me start, maybe with the first question about why am I positive that we will be able to improve on our operational excellence and our operational performance. I think when we, when we look at this year, Tim, we already made some achievements in that direction. This is also the reason why despite all the challenges and all the problems we had, we were able in Automotive to improve our EBIT margin compared to prior year by 1.2 percentage points. I think that is a strong sign that we've understood how to do it and how to drive the improvements, which were not only coming from volumes. I think that's clear. When you look further, there are multiple things that are now falling into place which we have initiated also during the course of the last year. The R&D efficiency program is definitely one of the programs where we have a high focus on where we look really carefully to improve efficiency and effectiveness of our R&D globally in automotive, where we've seen some impacts already in 2022 and where we know that we will see more impacts in 2023. I think the second big point is the reduction in manufacturing cost variations that we had to face during the course of the year, mainly really caused by the instable supply chains that we had to face. By adding the safety stocks that we've just spoken about and flattening or smoothing our supply chain, that is something that we definitely will see to pay in, A, on the manufacturing cost variation, but also on the premium freight side, which has been a hit for us. Last but not least, I think what is also important to mention is that we will see additional positive impacts from our Transformation 2019–2029 in 2023 above what we have experienced in 2022. I think this is the question why I'm so confident that we will be able to drive the operational performance improvements in Automotive. The second point you mentioned was that we had negatively priced contracts with some of our OEM customers. Let me assure you that we have been in very, very intense negotiations with our customers during the course of this year to negotiate pricing and compensation for the inflationary headwinds. As you can also see in the margin of Automotive, we've been quite successful in doing so. Yeah. Coming to the outperformance, or you mentioned the one or the other customer which has published, growth rates in 2023, which might be higher than the average, what we are guiding or what the marketing intelligence is seeing. I mean, our guidance is based obviously on the market as you've seen before and as well on the order book which we have from OEMs. This is highly dependent as well on new launches which we have, new products which we are bringing higher value per car. You have seen as well in the past, and we referred already that we have a higher net outperformance in 2022. If you look a little bit longer, we had a portfolio which was strongly changing as well due to the market, analog to digital, looking for the UX side, for instance. This has now phased out. We have now the new products coming in which supports then our net outperformance on the automotive side. That's the main reason why it's that large. If our larger customers are producing more cars and are successful in selling them, that helps us, obviously. However, our guidance so far is based on what we see in the market as well as on our order book. Once it comes to labor cost compensation or overall compensation, we are showing transparently to our customers how our costs have developed from 2021 to 2023. What we have seen last year and as well what we see this year, how successful we will be with the certain components we will see. As Katja referred, we are working in order to get as much compensation as we can. We have been relatively successful last year to get a vast majority of our cost increases compensated. We will do the same for 2023. Thank you very much. I struggle on the inflation labor cost side, but it's great to see that you are back on a much more stable path again after some very rough years. Well done. Thank you. Thanks, Tim. The next question comes from Himanshu Agarwal from Jefferies. Over to you. Hi. Thanks for taking my questions. The first one is on the autos. I see you're talking about the operational improvement. Is it possible for you to quantify the benefit that you are expecting from the Transformation program on the bridge? That's the first one. Just to clarify on the auto side, have you received all of your retrospective pricing related to 2022, or are you expecting some benefit to come in to 2023 as well? On the tires, two questions. One is on the inventory revaluation effect. Last year you had around, if I remember right, EUR 350 million-EUR 400 million of positive impact. Since raw mats are coming down, is it going to weigh on the bridge for this year? Lastly, on the tires, I think in the bridge, you for 2023 guidance, you're talking about some outperformance relative to the market. If, I think we were seeing some downgrading in tires. What gives you confidence that you'll be able to outperform the market in 2023? Thank you. Maybe I can start with the second question, sustainable pricing. You referred to pricing 2022, 1 time and not. I mean, we assume, and I mentioned this as well at the beginning when commenting the slide, that a big portion of that is sustainable. We have achieved to get sustainable price increases with our customer, means they roll as well over then in 2023, where we have to address as well the 2023 components. What makes us confident to outperform the markets on the tire side? On the regional side, looking with our setup in particular on the premium side, I referred before as well to a growing part of the season in Europe where we finally, with our product, could succeed. We still see a relatively strong and solid demand for the premium area. We have as well a strong portfolio profiting from trends in quality and in budget. We have shown as well before that we've been capable to outperform the market on the Asia side and on the North American side. Fair enough, looking on our market shares, which we have, those are still underdeveloped. We have a very solid product there, very solid technologies. We have strong footprint. There are lots of reasons with our customers over there to grow and get as well our fair market share, so to say, in those regions. Maybe just coming back to your first question with regards to our Transformation program, 2019-2029. I need to tell you that we have not broken down the individual gross effects per year so far. All that I can tell you is that we do expect additional positive effects in 2023 from our program. Was there an additional question? Thank you. Okay. Yeah, just on the inventory revaluation, if you could talk about that. Inventory valuation. What was the question on inventory valuation? Um- We missed that, sorry. Sorry. On the tires, EBIT bridge last year, there was around EUR 350- 400 million positive impact from the inventory revaluation. Now given raw mats are coming down, is it going to reverse this year? I would say, to reverse is probably not the right way to frame it, as we don't know the overall development of the raw material prices during the course of the year. It's pretty hard to predict how this will develop quarter-by-quarter. Yeah. I would not consider that to be a revaluation effect in the same amount. You have to consider as well that raw material pricing or the costs were increasing during the course of last year, and average where this year end has as well an influence on the inventory then going into 2023. As Katja said, very dynamic area. Let's see where this works out, but there is a certain effect out of the evolution of the raw materials, obviously, from last year. If you would have trailing raw materials going down and the end is below the average, then obviously you have more the headwind regards to revaluation than having a more solid pass-through or even a tailwind. How that ends up remains to be seen. Okay. Thank you. The next question comes from Philipp Koenig from Goldman Sachs. Over to you. Yeah. Thank you very much, also for taking my questions. I've just got two left. First is on ContiTech. Maybe can you just elaborate sort of, you know, what were the main drivers of weight on the margin? You're mentioning negative price mix. Have you taken some action on raising the prices both in the auto and on the industrial side of the business? Sort of, what makes you confident to get back into the 6%-7% margin corridor and eventually to the midterm corridor that you are, that you're aiming for. My second question is just on the R&D again. Sort of structurally, you know, obviously you have a very healthy and very strong order book after last year. Can we sort of expect in absolute terms, R&D to continue to step up over the next one to two to three years? So do you expect a stabilization at some point, when you've made the majority of investments in some of the secular trends of the industry? Thank you very much. Okay. Let me first talk about ContiTech and about what we've done on the pricing side. Let me confirm to you, Philipp, that we have increased prices on the industry and aftermarket business in ContiTech as well as on the automotive business during the course of the year. You know that we had guided for approximately EUR 600 million cost inflationary effects in 2022 for ContiTech, and you also saw that we that we have also guided for additional inflationary effects for 2023 to come, which we will for sure again address during the negotiations with our customers in all relevant business segments. I think that's the first one. On the R&D side, I think, we have already pointed out that we intend to invest and continue to invest into our future businesses and business models. You've seen the very strong order intake that we had during the course of last year with being about 26% above the 2021 levels. These new orders also require investments into R&D. What we do definitely intend to achieve is a better ratio in% of sales. Great. Thank you very much. There are no further questions. Thank you so much, Beatrice, and thank you everyone for participating in today's call. As always, Continental's investor relations team is available for you for any remaining questions. With that, we would like to conclude today's call. Thank you and goodbye.