The conference is now being recorded. Hello, ladies and gentlemen, welcome to the conference call regarding HELLA Quarter One Financial Results in 2023. 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 your hosts, Michel Favre and Bernard Schäferbarthold. Please go ahead. Thank you very much. Good morning to everybody. Thank you for your attendance. We will comment on our first quarter results. You have the presentation on the webcast. A very short introduction. Now it is good. FY means fiscal year and full year, we are on a full calendar year now base. Of course, we will compare the figures with the first quarter of last year, which was, as you know, not compared to the first quarter in the old HELLA, I will say, for fiscal year. This will ensure the, I will say, the full comparability. Of course, as it is quarterly figures, these figures are not audited. Going now to the figures, to the results, page five. This sector is taking advantage of a recovery, mainly in Europe, because if you remember last year, the first quarter was deeply impacted by the semiconductors. We are posting, I will say a good sales growth, huh, +14.8%, huh? We have, I will say a growth which is much above the market, but we clearly take as well, advantage of the geographical mix as we are more European and Europe is definitely the market recovering. As you will see, we have a growth in all our business units. Electronics is growing by 10.8% to more than EUR 700 million. Lighting 22.1%, close to EUR 1 billion. Lifecycle Solutions 12.8%, which is a remarkable, I will say, and profitable contribution. On the operating margin, we start as expected, 5.6% operating margin. As we have said, we'll improve quarter after quarter, but we have a small downside with the R&D cost, but Bernard will come back on that. Net cash flow, slightly better than we were expected. We have an adversity. We have some catch up on CapEx, but anyway, cash flow remain our top priority. As you know, we intend, we want to achieve 2% of sales as net cash flow. Now I give the floor to Bernard. Thank you, Michel. Good morning, also from my side to all of you. The sales development, it's a growth of 14.8% organic. Pro forma Q1 last year was at around EUR 1.7 billion. We are growing to a level of around EUR 2 billion. The FX effect is quite small and neglectable. If we look at the segments, Electronics is at EUR 763 million in comparison to prior year, around 11% higher. The operating income is lower in comparison to last year. There are two specific topics. One is that, in terms of the inflation in the first quarter, the inflation compensation or price increases to our customers, we had a slower start. We are only around 50% in the first quarter. Second is that the R&D spendings are higher than we expected originally. There's on one height-side, an increase due to the strong acquisition level we had in prior years. We also had some overspendings on some specific projects where we are preparing now for the launch. We expect that these overspendings will be over after the first half of this fiscal year. In terms of Lighting, we had a quite a good growth of around 22%. Exactly on the expectations we also had internally. The operating income is improving, still not at the level where we want to be as set in the Capital Markets Day, but a solid improvement in comparison to prior year. Taking into account that the compensation rate in terms of the inflation is very similar to Electronics in the first quarter, also only around 50%. We expect also in the upcoming quarters an improvement to that, so that we are on a good track to a continuous improvement in Lighting as well in terms of the full fiscal year. If we look at Lifecycle Solutions, a very decent development in terms of sales, in Independent Aftermarket, but also in our Special Applications business. We had, continuously, a solid development in terms of agriculture products, but also on our customer segment, construction. A very solid performance in terms of operating income, overall, a ratio in operating margin of 13.1%, as expected also internally, on track. If we look overall, regionally, we outperform basically the market around 8.7%. We are outperforming overall, in all three regions, specifically in Asia, we had some, how a smaller start also with product and customer mix we would see going forward. A slight better outperformance in our expectation in the quarters to come. Overall, we expect the outperformance to be roughly in that range in the upcoming periods, even slightly higher than we have seen it now in the first quarter. If we look at the full P&L, the gross profit increased specifically also in percentage of sales. We had a solid improvement, which is a very good development in our view. Also considering that in terms of the of the pass-through and the high inflation, as I said, we expect also a continuous improvement in the quarters to come. The R&D, as I said, on a level which is too high, in the first quarter, specifically with the overspend I mentioned. We would expect an improvement now in the second half of this year, specifically, in terms of the% of sales. SG&A, we will continue to work on it. Some specifics also in the first quarter, but we would assume a reduction in%, also overall on the full year and coming back to a quite similar level we had also in the last fiscal year. All in all, a start as expected and also predicted that we say we would be somehow in terms of operating margin, a little lower than the midpoint of our guidance in the first half. We expect a better Q2, and then a stronger also second half, which should bring us at least to the midpoint of our guidance we have predicted. In terms of net cash flow on page 13, we mentioned already in our last call that we would have a negative number in the first quarter on one hand side, in relation also with our profitability. On the other hand side with the higher CapEx level, Michel Favre was also mentioning. Also an increase in terms of working capital also due to an increase in receivables. Also a continuous high level on inventories because of the high volatility in customer demands. We expect in Q2 a positive net cash flow and overall also on the first half of the year an aggregated positive number. We are still confident about the second half and to reach our target of around 2% on the full year. Having said that, happy to take your question afterwards and I hand back to Michel for the outlook. Thank you, Bernard. Page 15, we go back to the volumes. As you know, we are very cautious on volumes because we think that the pricing situation, the price of cars are very high, could impact the market and could impact as a recovery. It is why we still stick on a flattish worldwide market. I know that some people, in a very famous organism, is more positive. We will see. As you know, what is important for us is the trend of four key customers, the three Germans and the famous EV American player, carmaker. When we are, I will say, a partner for more than 60% of our sales. Of course, the trend of volumes for these carmakers is more important than the worldwide trade. It is something that we will review permanently. Today, I can tell you we are close to our budget, even slightly lower, we have to be cautious. Page 16. I will repeat as the guidance says from EUR 8 billion-EUR 8.5 billion, operating margin from 5.5%-7%, net cash flow, a definitive 2%. As Bernard Schäferbarthold says, we are today in our vision in the middle of the ranges. Going to page 17, our priorities. Sorry to be very short-term, we have, of course, some long-term priorities, we'll build a bright future for HELLA. For the short-term priorities, 2023, we want to change our way to manage, to be more cash focused, which means that we have to be selective on one side. We have any way to pass-through inflation on the other side. We have a lot of discussions in process. We are reasonably advanced. The 2 next months will be, I would say, definitive, to close our situation for 2023 and to protect as much as possible our profitability. Of course, we will continue to accelerate on synergies. We have some definitive reservoir of ideas and of implemented ideas. This will be a very nice provider of profitability and cash improvement. As a conclusion, page 19, I will say a solid performance in Q1. You have seen the figures. We could have made better. Anyway, we have some, I will say, good providers of better results, unlike the pass-through, unlike the synergies. As Bernard was explaining, we will sequentially improve our figures and mainly on the cash. We expect that through the startup of new products, we continue to improve our trend of sales, while knowing that the EUR 2 billion of the first quarter is a record and a good achievement for HELLA historically. We are on track to achieve our 2025 targets. We will continue to build that. We will have, internally, a lot of strategic plan presentation. We will be ready to talk again, we say end of July, and to confirm our expectations for 2025. Being said, as Bernard said, I propose now to go to your questions, operator, if we can start the Q&A session. Of course. Thank you very much. Ladies and gentlemen, if you would like to ask a question, please press nine star on your telephone keypad. If you would like to withdraw your question, press nine star again. Please note that only three questions per person are allowed, so please limit yourself to three questions only. The first questions are coming in. The first questioner is Mr. Christoph Laskawi of Deutsche Bank. Please go ahead. Hey, good morning, thank you for taking my questions. The first one will be on current trading and a bit on call-off volatility that you see in Q1 and also heading into Q2. Does the environment in general improve, you would say, and make it easier to manage your operations? Especially in March and early April, was there more disruption than you anticipated? The second part on Electronics, obviously you highlighted the R&D and the lack of pass-through in Q1. Could we expect Electronics margins to be on par with last year for the full year? Will it be challenging because of the R&D excess expenses to reach the same level? On pass-throughs overall, you said 50% you got already. Should we expect a more meaningful step up in Q2 or just a gradual and then more weighted towards the second half? Thank you. Thank you, Christoph. I think you are always the first to ask questions. Congratulations. At least to launch this Q&A session. Current trading volatility, we have still some pressure on semiconductors. I think I mentioned that last time. We find the semiconductors, but we are always struggling, negotiating. We have to play between suppliers. Not easy as well to make some change because we are never sure that if we make a, I would say, technical change, the family will be still the family of the future. We have still, we need still some better vision of the semiconductors. What is more and more present, and it is very present in China, it is the ramp-up of EV. This is a massive, I will say, disruption in the market. You have some customers who are gaining market share. You probably have seen that BYD in China is gaining very significant market share. The Tesla, we can mention Tesla is gaining market share. Some traditional carmakers are impacted. I think we will continue to see this acceleration. You know that in 2025, the regulations will clearly boost in Europe, the EV, and will probably as well trigger, I would say, a switch from hybrid, which is today I think, as equal as EV, we clearly say hybrid will drop and EV will substitute. EV will continue to be the flagship activity. This has some impacts, and we see that model per model. We see that as well customer per customer. This is creating some, I will say, big changes. That, of course, we have to manage. You know that globally, HELLA is much more exposed to EV than to turbo engine. Globally, we take advantage of this, I will say impact. Your last question, yes, Electronics should post at least the same profitability as last year. It is our view today. To add, Mr. Laskawi, on a 4 weeks perspective, the volatility was around 25% last quarter, so Q4 last year, and we only had a small improvement in Q1, so we are still above 20%, no? On a 4 weeks deviation, no? It's still very high. Only a very small improvement. No significant change, no, to your point with all what's the reasoning Michel has given to you. On the pass-through, no, we would expect already an improvement in Q2, but the stronger step in the second half. Thank you. Just one follow-up, Michel, since you mentioned BYD, and I think Faurecia is obviously quite strong also with the local Chinese in that market. Can you actively leverage that connection through the Faurecia group now? Are seeing essentially gains in that regard or too early for that so far? No, no. What I can mention is that, we are very proud to receive the CEO and the COO of BYD in our Shanghai booth. I can mention that the Shanghai booth was a fantastic success, more than 25 CEOs of Chinese car makers visited us. Spent some, not only some minutes, I am speaking of 30 minutes, 40 minutes. You know that for a CEO, who is present to a motor show to dedicate 30-40 minutes is already a big step. We were very happy to receive these key people. On top of that, we have made some full presentation to BYD, with a lot of, I would say technical people, in BYD. This was made in March. We are actively leveraging our presence with Faurecia. There are some key points is that BYD for a part is integrated in our type of business. And probably we can bring something on the robustness, on the differentiation, et cetera, but it is something that we will continue to propose to trigger, if I can use this expression, towards these important customers. Thank you. Thank you very much, Mr. Laskawi. We have a couple of more questioners in the queue. The next question comes from Mr. Michael Jacks of Bank of America. Your line is open. Hi. Good morning. Thanks for taking my questions. My first one is just touching on one of the first questions that were asked, maybe just asking it in a slightly different way. In relation to current customer activity levels, are the production schedules that you've received thus far for Q2 tracking more in line with the IHS forecast or is it something lower than that? My second question is just on input costs. If you could perhaps just comment on how these have developed in relation to the key cost buckets thus far in Q1 for raw materials, special freights, and in electronic components. Thank you. Yeah. Thank you. Good morning. For your first question, the difficulty today is that customers are oversizing their call-off. They are always, I will say, anxious to get the components, they oversize for a big part. It is why we have this volatility, because we have to deal with them to understand how much they oversize. We have a problem with our work as a stock, because if we order exactly what they want, we'll have significant overstock. We reduce that. We try to take the right, I would say, safety, but we are forced to reduce the call-off. The big volatility is coming from this attitude, which is due to the big problem between 2021 and 2022. We need that customer will play, I would say, a reduction variability. Industry, variability is key. When you have we have a big variability, you have big cost. It is why we need absolutely to go back to a more, normal work. Normal work, sorry. Input costs are better than expected originally. Specifically, our raw materials, but also on our energy on our electronic parts, no? We are lower in percentage of our material ratio. It's around 1%, no, which we are lower than expected, no? In terms, in Euro terms, no, it would be around EUR 20 million better than originally we expected in our budget. In terms of energy costs, most of it was hedged, no? Only specifically for Romania, it was not possible because of the regulation and with the cap they had. Now we have an improvement in comparison to... That we have in comparison to last year, a significant increase in energy cost, but not as much as we expected, no? Even considering, no, this lower inflation that then already expected, no. I mentioned that in reference to our measurement point, which is June 2021, we have around 50% only of price increase we passed through in comparison to the inflation we have seen. Your question also related to special freight, no? We had a good improvement, no. There are only little special freights in comparison to the last year. Still some, but in comparison to last year, a good improvement. Thank you. That's great. Maybe just one small follow-up. Can you please just remind us what was the special freight impact last year? Last year it was a higher single digit million EUR amount in the first quarter. This year is now a low single digit. Very clear. Thank you very much. Thank you. Next, we have Mr. Giulio Pescatore of BNP Paribas Exane. Please go ahead. Thanks for taking my question. The first one on pricing. You talked about a 50% compensation rate in Q1, which is very impressive. I just wanted to understand how much of that is the carryover of the price increases you've done last year, and how much is new negotiations that you managed to sign already in the first quarter. The second question on synergies. Can you maybe elaborate on the phasing of the synergies over the course of the year? How much did you already achieve in Q1, and how much will be the step up in the coming quarters? The last one on Lighting, just quickly. The business seems to be doing really well, a lot better than some of your close competitors. Are you gaining market share? What is supporting the outperformance there? Thank you. Thank you, Giulio. Good morning. I will take the first and the last 1 for the synergies. I think Bernard is more competent than me. Pricing. When we negotiate the pricing, we want a price increase. You have 2 different solutions. 1 is a definitive price increase, which is the best solution. The second 1 is a temporary price increase that we have to document to keep, and of course, to continue. A big part is that. When we say 50% pricing, it is what we have secured. Of course, some are still valid, but we have to document and to definitely contractualize with customers. It is why we have only 50%. If you remember, we are speaking of 70% at 1 moment for last year. We have still to secure contractually a part of it. I will say we are on the good process because the process has been defined, and we have all the certification, starting with the semiconductors, to do it. For Lighting, I would say, we have a very good trend, mainly linked with the famous EV American car maker. I cannot give you the name, but you have understood, for this first quarter. We in the next year, for next two years, we'll be like the market probably, because the order intake was a little low in 2020 and 2021. On the other hand, we will start to take advantage of the very good order intake in 2022, and we are on a very good track today, in 2023. Of course, to, we say, have the big growth, that we want, from, I will say, 2025, two and 26 onwards. We will have this kind of, I will say, slow down acceleration. Today, if I see the order intake, yes, we gain market share, and we are probably taking advantage, as you mentioned, of some difficulties of our peers. Bernard? On the synergies, we set overall the target which was increased to a level of EUR 300 million and 40% for this year, around half of it for HELLA. This was the overall perspective. In terms of where are we now after the quarter, it's roughly to what we targeting to realize this year. It's around a quarter also. It's a quite linear approach, a little lower than linear, but minor. Yeah. Perfect. Thanks. Michel, can you just follow up on the pricing? Are you finding that car makers are pushing back harder than they were last year on the price increases also, or the negotiations have always been tough and it's just business as usual? Thank you. It's not business as usual, never, because we speak of a big magnitude of pricing. We have said that the impact of price increase is something like between 4%-5% for LR if we compare to June 2021. Because of the semiconductors on one side, because of the big increase of prices on some raw material, like plastics, and energy. We speak of very sizable figures. It's not business as usual. Inflation is back. Probably we will see a lower inflation now in the next months, potentially the next years, of course, to be confirmed. Of course, the attitude of car makers are different. Some play the game because they have the pricing power. They play the game as well because they anticipate that prices will be back. This will be in the two ways, which is important. We don't make concession. We want this price increase because we have to protect our P&L, and we have to protect our collaborators. We consider this as a duty respect to all our people. We have clear file, and we will get what we need as Pass-through. Sorry to follow up. Are you ready to walk away from potential businesses that you think are not, you know, reflecting the right level of pricing in case the car maker just decides not to give you any price increases? If in the new businesses there is clearly pushback on the I would say price adjustment, of course, we will drop respect to the business. In this world, if somebody is doing that, it's crazy, yeah? It's a basic assumption to take a business. Of course, if a customer is too aggressive, it will be a good opportunity for one of our competitor. Very clear. Thank you. We can be selective. We will be selective because my topics today in LR is that we are restricted as many people, on the resources. We have to adjust the growth respect to what is strategic, what are our strategic customers and partners, and how we can give the right means to everybody. Yes, thank you. The next questioner is Mr. Akshat Kacker of JP Morgan. Please go ahead. Morning, Michel. Morning, Mr. Schäferbarthold, Akshat from JP Morgan. Three questions from me as well. The first one on R&D expenses. You have previously mentioned that R&D will continue to go up to support the strong order backlog, especially in the Electronics business. What kind of levels are you thinking about for this year, and when do you see these investments tailing off based on your current order backlog? On the overspending that you mentioned on the R&D, do you expect to receive customer compensations on those extra expenditures, maybe by Q4? That's the first question. The second one, Michel, you mentioned Shanghai Auto Show in China. What are the views coming out of that auto show, please? Are you more bullish or more pessimistic around the developments in the Chinese market in the second half? The last one, I just wanna make sure I understand the discussion on cost inflation, so probably asking that in a different way. In the first quarter, what was the net impact from inflation in absolute terms on operating profit, please, across the key buckets, raw materials, energy and labor, please? Thank you. Bernard, you take the last one. Mm-hmm. No? For R&D, we have to adjust, according, I repeat, according to our resources. Today, we are over 10% of R&D expenses, which is a big investment. It is linked with the Electronics, as you know. It is linked as well with the growth. We continue to have a minimum 10% of R&D. As Bernard was specifying, we have some accelerated R&D, if I can use the expression, because we have to ultimate some strategic projects, which will be in the start of phase by the end of the year. We have no alternative. We need to put all the means on, I insist, strategic new products. For the payment by customers, of course, this is including the contract. Of course, in some cases we can have some specific developments. This is what we call reimbursement. We will continue to ask our customers to pay what is very specific. We could have effectively some discussions, negotiations on this. This is a part of our priorities. China, I will say fantastic dynamism, fantastic confidence in the future, fantastic team. We have a fantastic team in China as HELLA. I can tell you we have a fantastic team as Faurecia as well. They are very successful. They have taken some significant market shares. Both in Electronics and Lighting, we are leaders, but Faurecia as well. We have a very good position. What we have as HELLA is that we are traditionally the partner of our key international customers. We are close to 15% of our sales as Chinese. It is clearly not enough. We are coming back, and our Chinese team have some very good ideas, and we are coming back of how and what we will implement to accelerate our development with the Chinese. What I will say for the market itself, probably the fact that there are some repositioning of pricing. You have seen Tesla, and of course this has an impact on the EV, will probably reboost the market. In the market, consumers were a little expecting some additional grants, subsidies. This could a little block the market, but I think we can be more optimistic, on the Chinese market, with a big change, international car makers, we were representing close to 60% of the market last year, will probably represent less than 50% this year. The definitive winners are the Chinese, because the Chinese have an offer on EV at low price. When I say low price, that means below 15K, which is unique. The international car makers have big difficulties to compete with that. What I can tell you is that of course they will come to Europe after 2025, but they will come to Europe, and this will create a new competition and a new challenge. I come back with a fantastic impression, feeling on what we are doing, as Faurecia, as HELLA, and with a convictions that we have to act to accelerate our development, accelerate the development of low cost standard, et cetera, because we must accelerate our growth with the Chinese car makers. On the inflation, the higher costs are around EUR 80 million, no? Michel mentioned the 4%-5%, it's EUR 80 million. Around EUR 60 million is material, no? It's around 75%. EUR 10 million is higher energy cost, and the rest is on higher transport and also the overinflation in terms of labor. As we said, no, out of these 80, we realized price increases around 50%. Great. Thank you so much. Yes. Thank you. We have one more questioner in the queue. It's Mr. Sanjay Bhagwani of Citigroup. Please go ahead. Thank you very much, gentlemen, for taking my question as well. I have got 3 questions as well. My first one is on just going back on your commentary about Q2 and for the rest of the year. Just looking at the outperformance, is it fair to assume that the outperformance will accelerate going into the Q2 and also Q3, Q4? How are you seeing light vehicle production development as well in Q2? On the margins, again, I think you mentioned that H1 margins could just be slightly lower than the midpoint, then full year could be at least at the midpoint. Yeah, if you could provide some color on development for Q2 and H1, that'd be very helpful. Okay. That's my first question. I'll follow up with the next one. Yeah. Thank you. Thank you. Thank you very much. Good morning. Now outperformance, be careful because the second quarter, probably the geographic mix will play a lot. As last year, there was a lockdown in China, so the weight of China as volume growth and volume impact will be key. It will completely distort, I will say, the figures. As you know, China is more or less 15% of our sales. Probably we will have a negative mix on this. The figure could be strange for HELLA but for many, many European players, because of the geographic mix. On the outperformance per region, which is the most important, yes, we think that second quarter will be better because I repeat of startup of production. For the margins, margin-wise, we have spoken of a sequential improvement with Bernard. We would like to see now quarter per quarter a figure starting with a six. If you don't mind, I will not commit more. No? I think it will be the minimum figure that we like to see now for the next quarters. Thank you. Sorry, I didn't, I didn't understand the last one. The minimum figure you would like to see for the next quarter is what? Do you think- Starting, profitability starting with a 6%. Oh, yeah. Yeah, that's, that's very encouraging, and thank you for the answer. The second one is on, is on inflation. Maybe could you maybe provide a bigger picture color on the Electronics cost inflation? I mean, I understand that the semi cost is still a headwind, but a lot more other electronic components inflation is coming down, like those components like inductors or capacitors, which are less customized to the autos and given the consumer demand is falling for like other consumer electronics. Maybe can you provide some color on are you actually seeing, let's say, non-semi related inflation coming down rather fast than you were expecting? Yeah, maybe like, what's the total pro-proportion of your cost is Electronics, and within Electronics, what's the split between the non-semis versus semi components? Yeah, I said already that we have seen in comparison to our reference point, now EUR 60 million increase in material cost. Most of it was related to Electronics. Originally, what I also mentioned was a reduction of around 1%, we compared to our original estimation in terms of material expenses, you know, which is around EUR 20 million. This also the vast majority is Electronics. We are around EUR 15 million lower in terms of Electronics, which is exactly to the point. Know what you said, where prices partially are coming down. On the other hand side, it depends also on the different products specifically. On some semis, you know, what Michel was mentioned, we are still a significant bottleneck is there. There, the pricing is still high. Even the demand on customer side, on pricing is still increasing. It's a very mixed picture. That overall we feel that still electronic pricing is quite high. As you said, with some of the electronic components coming down, but not all. Thank you. Maybe can you provide some general split between overall Electronics cost basket, what's actually the semis versus non-semi components? That's just a very rough split can be helpful. On non-semi components, we are to this year, we consider that we have a very, very low inflation. Potentially in the second half we could start to see some, I will say, price reductions. Thank you. That's, that's very helpful. My last one is on Lighting margins. Could you please maybe explain the path to the margins, and then could you, could you remind us, like, I mean, the key drivers on margins going to the midterm targets for the Lighting business? for Lighting, we speak more of a free plus, improving sequentially. I hope that we will go to higher level by the end of the year. The main, I will say, driver will be on one side, the pass-through, because we were late last year to have the pass-through. Late last year, midyear last year. We are recovering. The second driver is the efficiencies in the third plan, and the third driver is synergy. Thank you. That is very helpful. Thank you very much. Thank you to all the questioners that raised their questions. We still have some time, if any of you have any questions to raise, please press nine star. There seem to be no further questions in the queue. I hand back over to the company. Okay. Thank you very much, and thank you for your attendance. The next, I will say, events are tomorrow, our AGM. Of course, everything has been said today. There is no further news to expect tomorrow. Anyway, it's an important event for the company. For our first half results, please be take the date 25th of July. Thank you and have a very good day. The conference is no longer being recorded.