Ladies and gentlemen, welcome to the Continental AG Analyst and Investor Call, Half Year Results 2023. 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 questions following the presentation. Let me now turn the floor over to Anna Fischer, who will lead you through this conference. Please go ahead, Ms. Fischer. Thank you, operator. Welcome everyone to our second quarter 2023 results presentation. Today call is hosted by our CFO, Katja Dürrfeld. Small reminder that both the press release and 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 to either of these groups, please kindly disconnect now. Following the presentation, we will conduct a question-a nd- answer session for sell-side analysts. To provide a chance for all to ask questions, we would ask you to limit yourselves to no more than three questions. This will help us conclude our call on time. With this, let me now hand over to you, Katja. Thank you, Anna. A very warm welcome from my side also, and great to have you all here with us today. Ongoing market challenges led to a pre-release mid last month. I'm confident you already know most of those relevant facts. Let's look first, however, to some details starting on slide three. Group level Q2 2023 sales came in at EUR 10.4 billion, 10.4 above last year's comparable quarter, which delivered an organic growth of 11.9%, and an adjusted EBIT margin of 4.8%, 50 basis points higher than Q2 2022. Adjusted free cash flow came in at negative EUR 14 million. Although we expected to be in slightly positive territory in the second quarter, this is rather a stabilization step towards improvement. With six months still ahead of us, further EBIT improvements are to come. By continuing strict focus on working capital, we remain confident to achieve our guidance here. Looking at our sector highlights for Q2, let's start with Automotive, where we see some progress in our sustainable pricing agreements. There are further contracts to be finalized in the second half of the year, some of which we've already signed between the second quarter due date and today, so I can report continuous progress. As we already announced, the challenges arising out of currency translations, especially with the Mexican Peso and Chinese RMB, sequentially burdened Automotive heavily. Looking ahead, order intake for Automotive came again in strong at EUR 8.6 billion lifetime sales, reconfirming that our technology fits to our customers' needs. Moving to tires, an adjusted EBIT margin of 13.7% continues the pace set in Q1, coming in again above the guidance corridor with strong price mix overcompensating decreasing volumes and inflationary effects. We continue, however, to expect market dynamics to become more challenging in the second half of the year. Finally, for both tires and Contitech, we see some relief coming in inflationary headwinds. Let's now look on the second quarter performance by group sector on slide four. Looking at all sectors, you will see that each made a positive step forward. Starting with Automotive, sales development continued strongly with a 20.1% organic growth year-over-year, while margin improved 190 basis points to -0.6%. Our margin improved year-over-year. Of course, we continue with our strict focus to achieve our guidance. I will explain to you in a minute some more big details on that. For tires, we achieved an organic sales growth of 5.5%, while adjusted EBIT increased to EUR 474 million. Both were supported by price mix compensating volume weaknesses. To ContiTech, the organic sales growth of 7.1% and adjusted EBIT of 6.4%, an increase of 150 basis points, held well against weakening volumes in some industrial markets. Finally, to this slide, we continue our ramp down for contract manufacturing according to plan. Now, let's look into our Automotive results in more depth on slide five, and let me share with you how we will meet our guidance for adjusted EBIT margin of 2%-3% this year. Pricing with our customers will be the main driver for our sequential second half year improvements. With some major agreements to come in second half, the pricing effect will contribute to clearly more than half of the planned result. In addition, R&D reimbursements will be strong in the second half, particularly in the fourth quarter. Additional positive drivers will be lower premium rates, as well as positive effects from our operational performance, mainly from improvements in the efficiency of new production lines and in the general labor situation. All in all, we are on the right path, and I'm pleased that our business is focused on key growth areas. Autonomous Mobility and Architecture and Networking delivered strong organic growth results this quarter, as shown here. Now on slide six, we can see our performance segmented by region for the second quarter. Automotive worldwide organic growth again outperformed vehicle production by around five percentage points, with Europe being our strongest performer, underpinned by our increasing content per vehicle as well as pricing. North America was for the second quarter this year running below the market. This is attributable to higher call-offs of models with less of our content. We are also transitioning to some new solutions, which just begin to ramp up in volume. Looking into the second half, we will have a positive effect from new pricing agreements with retroactive effect, as well as some improvements in the call-offs and retrospective mix. We expect that the trend to at least partially revert in the second half of this year, with positive signs of improvement already seen in July. In China, we grow with the market as it recovers. Being in line with the market is clearly a result of us engaging closely with our Chinese customers. Looking to securing our future on slide seven. We had another strong quarter of order intake in Automotive, achieving a total of EUR 8.6 billion lifetime sales. From the breakdown, we are pleased to show that our Autonomous Mobility team successfully booked EUR 5.2 billion, of which approximately EUR 4.8 billion was attributed to our new strategic partnership with Aurora. I have some more details on that in a moment. I also would like to highlight here the major contribution also coming from our Safety and Motion team, where our latest one box brake system and the stalwart of safety systems, our airbag control unit, contributed to the overall result of EUR 1.3 billion lifetime sales. Just a few months ago, we announced our exclusive partnership with Aurora to provide commercial scalable Level four trucking solutions. Now it's time for some quantification. We expect this business to deliver revenues amounting to EUR 4.8 billion. This reflects the current scope of the partnership and business plan till mid-2030, with targeted SOP in the United States from 2027. We are happy to collaborate with Aurora, given their already strong positioning in the North American market. They are partnering and have a long-term successful cooperation with customers such as Volvo and PACCAR. Overall, an excellent step for our strategic approach into this new and exciting growth field. Now let's move on from Automotive to tires on slide nine. We've talked already this year about the challenging market environment. However, I'm pleased that our tire colleagues were still able to achieve 5.5% organic growth year-on-year for the comparable quarter to bring home EUR 3.5 billion in sales, with an adjusted EBIT margin of 13.7%. Considering the weakness in both the European and North American replacement markets, our price mix ensured our ability to perform and has placed us in good stead for the second half of the year. We do expect volumes to continue to decline across all regions except China, which will put pressure on our sales line throughout the rest of the year. I will touch on the impact of that again in my summary. On the EBIT side, as we anticipated in the first quarter, both cost inflation and impacts from energy and logistics costs started to ease through the second quarter. We expect it to further abate through the second half. Now let's dive into our final sector, ContiTech, on slide 10. As we saw with tires, volume challenges remain, particularly in the construction and off-highway markets, weighing on our industrial business. Despite this, ContiTech achieved a solid organic growth of 7.1% and adjusted EBIT margin for the quarter of 6.4%, led by favorable mix in selected industry fields. Like in Automotive, ContiTech continues to benefit from new price agreements, which have been successfully renegotiated and implemented. Our pricing strength, coupled with the easing inflationary effects, underpins our confidence that despite the challenging volume scenarios we see, we will meet our ContiTech guidance this year. Let's look at slide 11 and our result of adjusted free cash flow for the second quarter 2023. Here we are progressing sequentially in the right direction with our Q2 result of negative EUR 14 million, and on track to meet our guidance this year. The result was driven by overall profitability increases, having a stronger impact on operating cash generation and supported by inventory levels beginning to reflect the more manageable supply chain situation. Looking to the investing cash flow, we had slightly increased capital expenditure to support our business growth needs. We continue to be on track to meet our adjusted free cash flow guidance for this year. Finally, I would like to review with you the update of some of our market expectations for 2023 on slide 12. Based on the volume, opportunities, and challenges which I've mentioned today, we are updating our guidance for both the vehicle production volumes and the replacement tire volumes. Starting with the vehicle production volumes for light passenger cars and light trucks, we have revised our worldwide view to the new guidance of +3% to +5%, as we increase our expectations for both Europe and North America. We also upgrade our guidance for commercial vehicle volumes. Looking at the replacement tire, passenger and light truck volumes. Now, midway through the year, we are seeing a significant decrease in demand in both Europe and North America, leading to an overall worldwide adjustment to land within the -2% to 0%. Further, we see a drop in the volume outlook for commercial vehicle replacement tires in Europe and also North America. Finally, in industrial production, we keep our overall guidance as is, although we will continue to closely monitor our important submarkets, where we already see some weakening impacting us this quarter and beyond. With that backdrop, let's review together our outlook on slide 13. Let's first look to the tire slide. With the downgrading of the volume outlook in the replacement tire market, we're equally adjusting our tire sales guidance for 2023, reducing it by EUR 0.5 billion from the previous range of around EUR 14.5 billion-EUR 15.5 billion, to the new range of EUR 14 billion-EUR 15 billion. While on the cost inflation side, we positively adjust our expected headwinds from negative EUR 400 million to negative EUR 200 million, reflecting the easing situation I mentioned earlier on energy and logistic costs. Next, please look at the line below, ContiTech. Here we are also slightly improve our guidance on the cost inflation headwinds from previously negative EUR 300 million to now EUR 200 million. The result of the sales adjustments and tires can be seen directly reflected in the overall sales of the group. For the group, as well as for each individual sector, we confirm the expected adjusted EBIT margins. Given the additional impairments resulting from the Russian business sale and announced restructuring measures in automotive, we increased the expected special effects to negative EUR 350 million. Finally, I would like to reiterate our guidance on the free cash flow. Now, that concludes my key messages for today, and I would like to hand over now to you for your questions. Operator, could you please open the line for the Q&A? Yes. Ladies and gentlemen, if you would like to ask a question, please press nine, followed by the star key on your telephone keypad. If you wish to cancel or withdraw your question, please press nine, followed by the star key again. Please press star nine now to state your question. The first question comes from Sanjay Bhagwani. Hello, thank you very much for taking my question also. Sanjay Bhagwani from Citi. I have got 3 questions. Before that, congratulations on, again, a very strong order intake. Yeah, my first question is on the Automotive. When we think of the H2 outperformance, excluding the pricing, that is largely the volume and mix, should we expect this to accelerate versus H1, given that you had mentioned that there are some profitable ramp-ups in H2? That is my first question, and then I'll just follow up to the next one, if that is okay. Okay. I should ask that question first, then I o kay. We will have to see how the whole situation develops at the moment, especially with regards to the North American market, where we are seeing some ramp-ups, as I, as I just confirmed. We're also quite satisfied with, with our current look on the Chinese market. Let's see in which direction that goes. I'm pretty confident that we will continue on the path that we've already shown in the first half of the year. Thank you. That's, that's very helpful. My second question is on, I think on the, on the second half margin improvement in Automotive. You already, I think, provided some really good details that more than half of this comes from the pricing. If you could provide some more color on, on the remaining of the variables, I think, you, you, you mentioned about R&D, R&D reimbursements, then also you mentioned about some additional cost, cost-cutting tailwinds. I think you also, also, on your, on your full year guidance, you had mentioned the ramp-up of new products with higher profitability. Could you maybe provide some more colors or details on how much of these other variables can contribute to this margin improvement? Yeah. I think what you can see when you look at the development of the last years also is that our second half of the year traditionally is quite strong with regards to the R&D reimbursements when we collect the money for the R&D that we are doing directly for our customers. This is a major driver always also in Q4 results. This is what you can expect again this year, this year to happen. When you look at our Q2 release, you also see that we had significant impacts in the second quarter on our margin in Automotive coming from special freights. We still face some issues in the North American supply chains, especially related to semiconductor shortages, which we expect to further ease during the course of this year. We also had some one-time effects from retroactive billing of special freights to us in the second quarter, coming from the first quarter, respectively, from last year, even. This will also go away. We will have lower special freights in total compared to prior year special freights. This will also support our development, plus the volumes that we are talking about, where we have also adjusted our volume guidance for this year. This will also help to stabilize and improve our operational performance in our plants. Thank you. That is very, very helpful. Finally, just one last I think if I understood it correctly, the large reason for the revenue guidance adjustment is the volumes. On the replacement tires, are you seeing any changes in the pricing expectations? If, let's say, pricing expectations are not changing, then I mean, if volumes are, let's say, if the sales is going down because of the volumes, if pricing is staying where it is, and if the cost is going down, then is it fair to say that the margins could rather be at the upper end of the guidance range than towards the midpoint? Good. That's a, that's a good question, Sanjay, Sanjay which I will answer by, maybe, yeah. We said that we've we still faced, some, some negative impacts in the first half of the year. We will have to see how things, will continue to, to develop. Overall, what we do see is a still a very strong pricing, pricing, in, in our, premium, brand segment. This, this remains to be, to be strong. There's a lot of discipline still in the market, with that regard. We will see how, the changes in material costs will finally, will finally materialize. Please keep in mind for the rest of the year that we also negotiated strongly with our OE customers last year for improved OE pricing, also on the tire side, which include material index clauses, which will then also kick in in the second half of this year. Thank you. That's, that's very, very helpful. The next question comes from Schneider Horst, from the Bank of America. Yes, thank you. It's Horst here from Bank of America. I also quite a few question, also want to ask them one by one. Follow-up to Sanjay's question. You answered it a little bit on tires. Same one for Automotive, because you still guide full range. The lower end of the range looks already ambitious, but in theory, is it still possible even that you achieve mid of the range, end of the range, and what does it depend on? That's number one. In general, Horst, we're, we're guiding a range, so the 2%-3%, and these we reconfirmed again. What, what does it take to get there is are the price negotiations with the customers, which we still continue to have, we have done more contracts finally negotiated already in July. I think this is, this is moving into the right direction. This also gives gives me confidence that we will, we will be in the range of our guidance. Where exactly we will see, because you also know that we spoke about FX developments. We will also have to see how the FX effects will develop. That takes me also then already to the next question. Because, of course, we see that the Automotive adjusted EBIT margin has declined, Q2 versus Q1. We understand the driver for H1, maybe also in year-on-year comparison, you provide some numbers. What, what has triggered in the end, the sequential decline? What has deteriorated in Q2 versus Q1, and what will change again? It's clear one of the impact should have been FX. Therefore, of course, one of the question is, What was the FX drop through on earnings in Automotive in Q2? Sorry, I cannot quantify the effect per currency, Horst. The major drivers for the decline were the Chinese renminbi and the Mexican Peso. For the Chinese renminbi, we had high payables in EUR in China, which then weighed on our results, and the Mexican Peso has developed strongly compared to, compared to last year. Yeah. We will have to see. We are currently deeply analyzing and trying to see what we do to minimize or to fight back those effects on our margins. Again, a driver is also that we had the full cost effect in the second half from the inflationary headwinds, but we have not finally concluded the negotiations with all of our customers. That has also led to the drop. You say you had an impact on revenues from FX of minus 1.1%. Can you quantify then a drop-through to earnings of this minus 1.1%? I think it's a double-digit compared to Q1, I don't have the full, the, the exact amount in on hand right now. Yeah. Yeah, no, no problem. The last question that I have is on raw materials. Since I think you do not provide a specific guidance on raw materials, you say it was flat in H1, but I think you exclude raw materials from your, from your guidance. Therefore, my question would be, what tailwind can we expect from raw materials, basically in ContiTech and also in tires in H2? Okay. The point, the point on that, what I said it was flat for tires. Yeah, that, that's, that, that's an important, important statement to make. It was definitely not flat on Automotive, because in Automotive we do guide in the EUR 1 billion that we have, yeah. We said, we say that the majority of it comes with, comes with the, with materials on Automotive. Yeah, just to make that clear, yeah. We've already seen an easing in raw material prices in the second quarter. Even if we are still negative in the first half, we expect further significant recovery for the full year, but it's too early to really quantify the effect on our, on our P&L at the moment. Yeah. We will give... We will keep you updated. Is it still possible? That, that was for tires. Okay. All right. Okay, that's also not considered in your guidance yet at all? It is. It is con Any raw material tailwind. No, no, it is fully considered in our cost inflationary headwinds of EUR 1.4 billion. The tires guidance, the EUR 200 million, does not include any negative headwinds anymore, yeah, the updated guidance. Also not a positive tailwind? Not, nope. This is what we, what we're looking at now. Okay, all right. Thank you. That's helpful. The next question is from Giulio Pescatore from BNP Paribas Exane. Hi, thanks for taking my question. The first one, going back to the EBIT bridge for Automotive. I was surprised that you didn't mention the cost restructuring effort in the, in the way to get to the higher margin in, in the second half. Is that not gonna be a contributor to the margin improvement? Can you maybe update us on, on the, on the program? How much of the EUR 1 billion you think you can achieve this year, and how much will then shift into next year? This is the first first question. Thank you. Now, you, you've caught me a little off guard, Giulio. When you're talking about our, when you're talking about our Transformation 2019-2029, 2019, 2029, this program runs at normal, as expected, I would say, and we expect to achieve 850 million in gross savings by 2024. We already do have some effects in our current, in our current results, but it's an ongoing, it's an ongoing program, and we've always guided for gross savings here. Okay, thank you. Can y eah, pretty much a half, maybe this year, and then the remainder this next year, of the EUR 850? No we are already on a very good way with the program in general. We are also. Yeah. We never broke it down on a yearly basis in detail, Giulio. We've already achieved a significant number already this year. Okay, thanks. The second one, I mean, we talked about the CMD before, potentially Q4. Can you maybe confirm if that's still your intention? You know, we talked a lot about portfolio structuring. Is there anything you can say in terms of your willingness to look more, you know, more actively in the short term to any potential divestment or spin-offs? Thank you. I think Nico announced it at the tech day to be in the winter season. As a, as a former tire guy, he meant that to be between October and Easter. We'll keep you posted with the date, and as we've always confirmed, we are doing reviews on our portfolio on a consistent and consequent basis, and in case we have news to share, we will do that in due course. Okay, perfect. Thank you. The next question is from Thomas Besson from Kepler Cheuvreux. Thank you very much. I hope you can hear me. I have three questions as well, please. Firstly, on Automotive, can you tell us, at the end of June, what proportion of your Automotive revenues have already been negotiated with your customers in terms of inflation? Knowing that a lot of automakers have told us that they, in their mind, most of the negotiations were already over by the end of June. Can you comment on that relative comment? Second question, kind of more of a long-term question. Both your Automotive and Rubber businesses have seen some clear deterioration in terms of working capital. How long do you think it's going to take before we see some real improvement on that front? Do you think we're ever gonna get back to the pre-COVID situation in terms of working cap? How long do you think it could take to get there? Last question. I'm a bit puzzled by your earnings seasonality, notably in Automotive, over the last couple of years. Normally, the two strongest quarters in this business are Q2 and Q4 because of volumes and R&D reimbursements. In this year, like last year, your second quarter is terrible despite strong revenues. Can you explain that? Can you tell us whether you think that once we are out of this high inflation phase, we're gonna get back to such seasonality, where Q2 and Q4 are the best quarters, or whether it's something new in your business, which means that the first half is weaker and the second half is stronger? Thank you. Okay, let me first start with the amount of negotiations we've already concluded. As you know, Thomas, we don't, we don't quantify of how much we have already achieved. You know that we are working heavily on the to recover as much of the cost inflationary headwinds that we are facing in Auto. That would mean the EUR 1 billion. As you know, we've also communicated that the cost inflation is very kind of stable between the different quarters. Yeah, as we've fallen short, so to say, on our expectations, you see that there's still something to come for the last, for the last half of the year, for the second half of the year. That is under negotiation, still ongoing. There are still some, some contracts that we do have to negotiate with retroactive effects to to catch up. The second question was about the working capital topic. I think we've clearly said that comparing the current, now, situation in the supply chain overall worldwide, that an increase in working capital is something that we will continue to see and that we do not expect ourselves to get back to pre-COVID levels, especially on the Automotive side. The reason for that is that we had to build up stocks also upon customer request, to limit potential effects of shortages in the supply chain overall. What we're doing right now is we're working heavily to determine the right level of inventory for the different, for the different parts and components that we have out there. Where you see that we have reduced now inventory levels for probably the first time, really, for a couple of quarters, so that our measures that we have decided on and that we've taken are now really, getting, paying into effect. What you also need to keep in mind, and this is what I've also said, especially, looking at the year-end figures, last year, is that our customers have also changed their payment behavior, quite heavily, and this is also something that we have to work against. Looking at the Q2 result this year and also when you talk about last year, what I just mentioned is that we do see the full inflationary effects being in place in the second quarter of this year, and we have not yet finally concluded the negotiations with our customers. This is the reason why the second quarter was still, was still weaker, plus the one-term effects, plus the FX topic that, that we spoke about. Will we get back to more normal levels if the inflationary headwinds will become normal again, call it like this? Yes, that is definitely our expectation. Thank you very much. Our tires, the second quarter did not look that bad. Yeah, absolutely. Thank you. The next question is from Jose Asumendi, from J.P. Morgan. Thank you. Hi, Katja and as well. Hey, a few questions, please. On tires, I was wondering if you could please just describe a little bit why what's going on in the industry and your t he reasons to downgrade the guidance on replacement tires across passenger car and truck. If you could, you know, maybe elaborate a little bit, how far, how many quarters do you think is it going to take to see that is stocking done on the truck tire side? Also, specifically on the bridge, if possible, do you think volumes can turn positive in Q3? From your experience with pricing in a deflationary environment, how does pricing evolve naturally for the business? That'll be the first bucket. Second bucket, very simple, UAW negotiations kicking off in Q3. From your experience the, the past years, are you expecting some production disruption in September, October? Have you maybe overproduced in the first half, and this might not have a major impact in the second half? Is this part of your guidance overall? Thank you. I'll start with the market question on tires. We've reduced our sales outlook because we do see a continuous weakness on the European and North American market on the replacement tire side. Why is that? Part of that is, as you already said, still having higher inventory levels than in the past with our dealers, which means that the stocking takes place later in the year in some areas. There we saw that with the summer tire stocking also, and we will have to see how the winter tire business stocking will really take place. That is, in general, a weakness in the market at the moment. What we also do see is that some of our dealers are still hoping for price reductions, and that this also delays the stocking period a little bit. I think that, that is something that we, that we definitely do see, and this is the same for, for the passenger car passenger light truck tires and also for the truck tires. How long it will take to normalize, we will have to, we will have to see. There's currently no real projection, projection possible. For us, that is the reason why we've adjusted our market outlook, and we've, we've also reflected that in our sales expectations for this year. On the UAW side, I've, I've seen the request that were put out there, and those are strong requests and heavy requests. This is, this is what you will see. We are already used to high cost inflationary impacts, but the request of the UAW currently is a new category, I would call it, with regards to their expectations. If that will lead to production interruptions during the course of the year, I cannot say for now. Is such a potential disruption part of our guidance? I clearly need to say no. Got it. On the revenue tire bridge, do you think volumes can turn positive in Q3, or should we still pencil in some softness there, some negative number? On the automotive. On the, on the tire. On the tire. Revenue bridge. Do you think we should still expect some negative volume there, or do you think there's a chance for, for the business to turn positive on volume? I think we've just adjusted the guidance, so our expectation is not a further weakening beyond our, our current sales projection. Got it. Thank you. That's great. Once again, the reminder, if you want to ask a question, please press nine star on the key on your telephone to ask a question. The next question comes from Tim Rokossa from Deutsche Bank. Yeah, thank you very much, Katja and Anna. It's Tim from Deutsche Bank. I have two questions, please. The first one is, heading a bit in the direction that Thomas also came from, I think. I mean, FX is one of the explanations, but you are one of the three largest suppliers globally. You are a key partner to all of your OEM customers, and the fact is you make zero profit on EUR 5 billion revenues and 20% growth. Why do you think you are in this situation? I mean, we can debate about all sorts of nitty-gritty points like FX, which have a meaningful impact in a given quarter. If you start at 6% or 8% margin, that wouldn't even be worthwhile discussing, really. What's the fundamental problem that you have in Automotive? What's the pivotal moment that brings you back into being a normal supplier that generates returns that are adequate to your size? Is it the renegotiations? Is it EUR 6 billion revenue run rate? Is it new contracts materializing? All these sorts of questions. Secondly, when we think about your customers on the Automotive OEM side, they have pretty long order backlogs. Obviously, they work this through. Now, the fear is that a lot of investors have that post that order backlog, there isn't much coming, and we would see a bit of a downfall. We get very conflicting messages on that from the different OEMs. What do you currently plan for, and what do you see in your call-offs? Do you believe that we will see a dip post the order backlog having been worked through? Do you notice that there's a certain improvement, in particular in Europe, like we have heard it from some of your OE customers over the last few weeks and months? Thank you. That's a, that's a broad question, Tim. In general, with regards to, with regards to our, to our insufficient performance on automotive in general, this is how I would call it. I fully understand your point, and, the only thing that I can really point out is that we've been probably hit due to our portfolio, mostly from the transformation of the industry, which requires us, on the supplier side, to heavily invest into the new technologies, upfront. What you do see is that with the order intake that we are having now, we have definitely taken the right decisions on the investments that we have made, but those investments still do and have weighted heavily on our, on our margin performance in, in automotive. We are in negotiations with our customers, and as you said, we do have a very broad customer base and are a very relevant supplier to our customers. This is also why we are fighting for our new price negotiations and why we are also following a quality over speed approach, maybe compared to some of the others, to really make sure that we get what we deserve for the products and the services that we do provide to the industry. On the automotive orders or on the backlog that our customers are talking about a lot, we do see a quite, quite good situation in the market. This is why we've raised the expectations on the market outlook from 2% to 4% to 3% to 5% for this year, Tim. We also don't see any signs of weakening order intakes at the moment from our side. When you look at the mid to long-term perspective, we've been reporting record order intakes for quite some time, quarter over quarter over quarter, which means that we are supplying the right parts to participate in the growth and also in the, in some areas, maybe also adapted strategy of our, of our customers. When you think about the negotiations and you want the quality over speed, I think that's much appreciated, but ultimately, you have to conclude these negotiations because they, they consume quite a bit of management power, I assume. Will this definitely be sometime in Q3 or at least H2, or do you believe you may wanna drag this on if no OEM wants to agree on the quality, but rather wants to settle on quantity? Thank you. Well, as I've already pointed out, that the expected, price negotiations do play a major role in achieving our 2%-3% guidance for this year for Automotive, you can be sure that we will work very hard on concluding everything. Right soon as possible, and also during the course of this year, as we were able to do also last year. Makes sense. Thank you. Next question is from Himanshu Agarwal from Jefferies. Hi, thanks for taking my questions. Himanshu from Jefferies. Just want you to come back on to the order intake. The EUR 8.6 billion orders includes around EUR 4.8 billion from the Aurora partnership, which is on the commercial vehicle side, and I thought it should be incremental to your passenger cars business. Because if I adjust for that, then it looks bit weak overall, especially in Safety and Motion and User Experience segments. Also on the EUR 4.8 billion, is it all hardware, or does it also include some expectation of your new business model, model related to revenue per mile? Also, if you can talk about the duration of this EUR 4.8 billion of order intake, because it looks like it's slightly longer dated than a normal contract from a passenger car OEM of five to six years. Thank you. Okay. Let me start, start with the first point. As you all know, order intakes are not linear or are not always comparable quarter by quarter by quarter. We have also said that we do have a quite nice order intake on the Safety and Motion business this quarter. I don't see that this is any, any signs of weakening, of weakening order intakes. You are right that we don't show one big UX order intake this quarter, this is also due to the reason that we have already had a significant order intake for UX during the part course of the, of the last, of the last quarters, quarters in general. Yeah. I think all that is really, is really still strong. With regards to the 4.8%, this business does not only include hardware, this also includes the full fallback system, which is required to keep the truck on the road in case the artificial intelligence driver does not perform anymore, and this will help to stop the truck in time. This is something, this is a systems development that's completely coming from Continental in that case. The duration of the sales, when you, when you keep in mind that we said that we expect the start of production to start from 2027 on, mid-2030 is not a longer period than usually with regards to full serious production running. Just to confirm, any revenue based on per mile basis, is that going to be incremental to this, or is that already included in? That is a part. That is included in the 4.8, 4.8. Okay, thank you. The next question is once again, Giulio Pescatore from BNP Paribas Exane. Hi, thank, thanks for taking me again. I'll try my luck on the UAW negotiations. Can you just give us an idea of your exposure to Stellantis, GM, and Ford in North America? What I can give you is an exposure of our sales in 2022 to North America, and we generated 27% of our sales in North America in 2022. Okay. I don't know, a third of that with Detroit Three, you can give us just a general sense? No, nothing, nothing more in particular, Giulio, I'm sorry. Okay. Well, I tried. Sorry, second one. On the, on the order intake, I think one of the key problems today, at least when I speak to investors, is that, generally, they don't believe that these order intake numbers are credible or real. I think that's because in the past, you know, suppliers in general have given big order intake numbers that never translated into sales and, and, and growth. Can you maybe just elaborate or give us some confidence, around the type of assumptions you make when you book an order intake on volumes, pricing? You know how credible is this are, are these numbers? When you look at our outperformance of the market, Giulio, and the order intakes of the past, I would say that we do have some proof points that we are growing over proportionally and in line with the order intakes that we, that we have, that we do have. What we do is we take the, we take the volumes, from the, from the quotations, and we project them into, to determine the lifetime sales of the order intake. Yeah. That is a credible business. Okay, you use the assumptions given by the car makers. You don't take a discount to those volume assumptions? Only if we have significantly different experiences. Okay, understood. Thank you. The next question is from Frank Biller, from LBBW. Yes, hello. Thanks for taking my question. It's on your outlook. When taking the outlook, here, you reduced the revenue line by EUR 500 million, talking about lower headwinds in the range of EUR 0.3 billion. What is missing here on the margin side? Normally, that should increase the margin by about 0.7 percentage points. You're leaving with your margin targets of 5.5%-6.5%. Are you here... have you more room for reaching the guidance, or was it a clear missing of your margin expectations in the first half? What's behind that here? When we don't guide on margins per quarter or per half, per half of the year. When you look, for example, at the tires business, we're significantly above our current margin corridor on the tire side, yeah, in both quarters. I would not speak about a missing of the mar-- about missing margins. And also with ContiTech, we are pretty much in the middle of the guidance at the moment with regards to, with regards to the margins. Where we fell short was Automotive, especially in the second quarter, compared to the expectations, but we are still confirming our guidance for this year, the 2%-3%. When reducing EUR 500 million on the tire side, this also comes with a margin. Yeah. That is the effect, and I've also spoken about some of the effects on the tire side, like the raw material index clauses kicking in on the OE side, on tires, which will be a burden for the second half of the year. Overall, I would say by reducing the sales expectations, especially on replacement tires, by EUR 500 million without adapting the margin expectations, I think this is a good sign that we are, that we are managing our cost positions quite well, and that we are confident that we will be able to achieve the margin guidance, especially on the Automotive side for the second half. The operating leverage here is in the range of 40% in tires? We never talk about You reduced the headwinds by EUR 200 million and, still, leaving the margin guidance and EUR 500 million lower revenues, so this should lead to a 40% operating leverage. Well, we do have a mix effect coming from more OE sales, which have a different margin profile than the replacement tire business. As you've also seen, we've increased sales expectations on the OE side. Yeah, don't p lus, the raw material index clause is kicking in. Mainly the mix is the reason then, yeah. I see. Thanks a lot. You're welcome. The next question is from Horst Schneider, from the Bank of America. Yeah, thank you for taking me again on the call. Since you said I've got some time left, thought it's worth trying. When I look at your free cash flow guidance, it implies also for H2, quite strong cash generation, which maybe is also linked then to some higher earnings in Automotive, even though that does not explain then the full part of the needed cash improvement. Is it more a last-minute issue if this cash flow guidance will be reached, or we see already in Q3 then some substantial progress? What does it depend on that this free cash flow guidance remains achievable, number one, and number two, just to follow up on this UAW potential strike impact? In case of a more severe strike, you would say that your Automotive guidance could be challenged, let me put it that way. Let me start first with the, with the cash flow topic. You've, you've, you've already said that the improvement on the EBIT line in Automotive is going to be a driver for, for the cash flow guidance for the, for the second half of the year. What will also kick in is the improvement on the working capital side, which is still required, which we've always also said very, very, very clearly. That means, get the inventories to the level that we are expecting at the moment. Make sure that on the, on the receivable side, on the OEMs, that we will get the payments as expected. I think that that is also clear. It's always been the case on the Automotive business that with the with the Q4 reimbursements on on the R&D that this is a very strong contributor also there to to to the cash flow achievement in the second half. We will see improvements in the third quarter because we are managing our working capital differently now, we expect the price negotiations with the OEMs to be to to continue, to continue to be successful. This is this is what I would say with that regard. As I said, the UAW negotiations and potential strike impacts are not part of our guidance. If that has an effect and how much of an effect, I can't tell you at the moment, Horst. Of course, yeah. All right. Okay. Thank you. The next question comes from Tom Swift, from Morgan, Morgan Stanley. Hi. Hi, everyone. Hi, Katja. I guess just a question from the credit side. I think just to follow on from Horst Schneider's question. You know, if I look at the working capital for the year, it's, you know, a consumption of, you know, call it EUR 1.8 billion or so. How much of that do you expect to unwind back in the, in the second half? Then following on from that, you've obviously got some maturities that, I imagine one of the pieces have been refinanced. I mean, what's the expectation? Are you gonna pay some of the bonds down? Will you refinance them? Then on top of that, what's the implication for the interest cost going forward? When I look at the interest paid, it's, you know, half on half, it's kind of more than doubled. How do you factor that in and think about the free cash flow as well from that perspective? Thank you. Oh, that is t hese were a lot of questions. I hope I've got them all. In general, with regards to the working capital, our smart inventory program that we have established in Automotive will play a major role in reducing the overall working capital in general. And this does not only include the inventories. Inventories is one piece to it, the accounts receivables are a second part to it, and the payables are the third part to it, to really manage that. Overall, our working capital should decrease by at least around 10% from the current level. That is the expectation. That was the first question. With regards to the maturities, you can see in the line-up that we do have two bonds that will mature this year. We have already done refinancing in the fourth quarter of last year and also already this year, where we've issued another bond with a value of EUR 750 million. We have already done our homework, as I would say, with regards, with regards to the refinancing of the maturities that we're expecting for this year. We've done that, by the way, at a good pricing level. That is also something I was, I need to say. There's not too much of an expectation on negative impact for this year coming from the refinancing. The last question, I kind of I think that's, that was it. Well, just the interest cost going forward, because it has, you know, substantially increased in terms of the cash interest paid. Given that you are refinancing or you've already refinanced some, refinance some really cheap debt beforehand. Just any, any clarity on what you think for, for cash interest cost going forward? Thank you. I would say that, that there are more... In general, we do have a, a quite good maturity level on our bonds overall. You do see them when you look at the, the, lead time for the rest. I don't expect significant impacts from the, from the interest rate developments in the, in the near term for us. Thank you. The next question is once again from Thomas Besson, from Kepler Cheuvreux. Thank you. I would like to come back to Forex headwinds in Q2, and whether you could give us any more indications on how we could expect this to develop going forward. You mentioned the Mexican peso and the Chinese RMB are the two main headwinds. Can you give us more details on whether we are talking about just translation hits or some transaction headwinds as well, whether it's purely operational Forex headwinds or also partly linked with your debt? Well, any indication on what we should expect and how we could model the expected impact forward would be helpful. Thank you. I would know the exact development of all the FX rates worldwide for the rest of the year. I would be I would be a very, very, very smart person. I think it's both, it's translational and transactional effects that we're currently, currently seeing, not, not on the debt side. Overall, we are currently really working heavily, Thomas, to find out if and in, and in which regards we, we want or we can do something to do, to de-risk overall. There's nothing, there's nothing else I can, I can talk about at the moment, yeah. I think the, I think the, the Mexican Peso is, is really due to the fact that we are producing heavily in Mexico, as a lot of other automotive suppliers are currently doing and have already spoken about. This is an effect that we are monitoring really closely. Thank you. At the moment, there seem to be no further questions. If you have any, if you have any additional questions, please press nine, followed by the star key now. That seems not to be the case, so I'll say thank you, everyone, for participating in today's call. As always, should you have further questions, the IR team is available. Please get in touch with us. With that, we would like to conclude today's call. Thank you so much, and goodbye.