Slide 1: Commented Slides / Conference Call Q1 2024 Earnings
COMMENTED SLIDES / CONFERENCE CALL Q1 2024 EARNINGS 1 PUBLIC
Slide 2: Company Representatives and Call Participants
Company Representatives Klaus Rosenfeld, CEO Claus Bauer, CFO Renata Casaro, Head of Investor Relations Conference Call (Active) Participants Akshat Kacker, JP Morgan Horst Schneider, Bank of America Marc-René Tonn, M.M. Warburg Michael Punzet, DZ Bank 2 PUBLIC
Slide 3: Introduction by Renata Casaro and Klaus Rosenfeld
Renata Casaro Thank you very much. Dear analysts and dear investors, welcome to the Q1 2024 Earnings Release and without further ado I pass the floor to Mr Klaus Rosenfeld, CEO of the Schaeffler Group. Klaus, the floor is yours. Klaus Rosenfeld Thank you very much, Renata. Ladies and gentlemen, welc
Slide 4: Agenda
mm WD = Overview Business Highlights Q1 2024 Financial Results Q1 2024 AGENDA Outlook PUBLIC
Slide 5: Key messages
Let me start on page four with the key messages. We can present today a strong Q1 in a continued difficult market environment. I think the numbers speak for themselves. If you look at the top line, Q1 sales are flat but we have to look at that against the high comps of Q1 2023. Automotive Tech with
Slide 6: Key messages: margin, free cash flow, guidance
Bearings & Industrial Solutions. You see already from this first page, and Claus is going to explain that in detail, that there is a bigger delta in Gross Margin, 26.6% versus 23.1%. That is a one-off impact that comes from a technical change in how we value inventories. That effect is not included
Slide 7: CEO judgement: highlights and lowlights
The famous page five with a CEO judgement, highlights and lowlights. I think I said it all already. Automotive Tech, strong Order Intake, strong EBIT margin, certainly also driven by the mature business. Vehicle Lifetime Solutions with a record quarter. We also see that the trend that started end of
Slide 8: Agenda
a wWwhN za Overview Business Highlights Q1 2024 Financial Results Q1 2024 AGENDA Outlook PUBLIC
Slide 9: Group numbers Q1 2024
Let me go to page seven, briefly, on the numbers. You see here what I said before, Sales flat, EBIT margin slightly lower. That also includes an impact that Claus is going to explain from the At Equity consolidation of Vitesco that sits in this EUR 322 million, with minus EUR 8.0 million. 9 PUBLIC
Slide 10: Sales by region and division
If you go to page number eight, you see what I said before. Top line performance flat and a little bit mixed. You see here that Americas was strong with 4.2%, Europe flat and China below Q1 2023. And if you look into the columns you see that that is more or less driven by the Bearings & Industrial S
Slide 11: Automotive Technologies results
Quickly, on the divisions, I’m not going to say much here but the key numbers are Sales Automotive are more or less flat. On an FX-adjusted basis, slight growth. EBIT margin slightly up. 5.3% I think is better than what people expected and also above previous year. 11 PUBLIC
Slide 12: Automotive Technologies order intake
You see a little bit of detail on the Orderbook on page ten. EUR 2.1 billion is the overall Order Intake for Automotive Technologies without the bearings that are now part of Industrial, and 1.5 of that is from E-Mobility. In E-Mobility, one of the interesting new orders that came in is an OEM nomin
Slide 13: Vehicle Lifetime Solutions results
Vehicle Lifetime Solutions, as I said, the shining star in this Q1 report. 17.4% margin speaks for itself. At the same time 8.6% growth. That is all on the positive and I can already say here it looks like this trend continues also in the second quarter. It is clearly driven by the fact that there a
Slide 14: Vehicle Lifetime Solutions investments
The heavy investment in the last years into modern customer portals, into the right product mix, into logistics, all of this is now paying off and we are optimistic that also the capital market will at some point recognize the strength of our Vehicle Lifetime Solutions business. 14 PUBLIC
Slide 15: Bearings & Industrial Solutions results
Now, let me come to the last Division, Bearings & Industrial solutions. As I said, challenging market environment, minus 4% and 8.5% is more or less the same margin, like last year. Claus is going to share with you the details. I talked already about the Wind business in China. That is a challenging
Slide 16: Industrial order book
In terms of Orderbook and how we see the next quarter. You know this famous chart with Orderbook Industrial for three months. Here, it is now the situation where the Order Intake, Orderbook development cuts from below into the sales curve. That’s typically an indicator that the development bottoms o
Slide 17: Capital allocation
Last two pages. The famous one on Capital allocation. Not much to say here. We continue to be disciplined in how we invest. 5.4% capex ratio, reinvestment rate slightly below 1.0. Very similar to Q1. No big changes here. Clearly important to follow up with the big Automotive Tech customers. We have
Slide 18: Vitesco transaction update
Last page from my side before Claus takes over is then on the transaction. I think you followed the Annual General Meetings. They have approved, Schaeffler with 100% and Vitesco also with a very dominant majority, above 90%, the transaction. We will now focus clearly on getting our preparation for D
Slide 19: Agenda
aA WP = Overview Business Highlights Q1 2024 Financial Results Q1 2024 AGENDA Outlook 19 PUBLIC
Slide 20: Sales development
Claus Bauer Thank you very much, Klaus. Ladies and gentlemen, good morning also from my side. Let’s now have a more detailed look into the numbers. Thank you. Sales at prior year level, as Klaus already alluded to, is a strong result based on the strong comps and the difficult circumstances that we
Slide 21: Gross profit and inventory valuation
So, a good result and let’s jump into Gross Profit. I think that’s the exciting chart this time and, as Klaus already said, I will explain to you one special impact here and you see it best in the waterfall chart on the left side. The inventory valuation has a positive impact of EUR 117 million and
Slide 22: Overhead costs
Overhead costs on the next slide is a little bit higher than you used to see and, as we have seen in the last year, that has some obvious reasons and some reasons that I’m happy to explain. In Admin you see, obviously, an increase in the level based on the M&A-related services that we are absorbing
Slide 23: EBIT and Vitesco at-equity
If we then go to the next slide. As reminder, in EBIT you see like-for-like there’s no inventory valuation impact on Gross Profit, and we think maintaining the level is a very strong result. Klaus said it already. There is also a minor impact in there of the At Equity valuation of our shareholding i
Slide 24: EBIT by division
emphasize enough, in the environment, in the circumstances and with the first quarter of last year being the strongest quarter of last year, a very strong result, especially as we go forward and have some optimism still of improvement in the second half of the year. I think that is a very good start
Slide 25: Automotive Technologies detail
Now, let’s get into more detail regarding the Divisions. First, I start with Automotive Technologies. You see the new businesses, E-Mobility and Chassis, are the growing businesses but Engine & Transmission year-over-year almost flat, so that is obviously driving the sales and margin mix. Also impor
Slide 26: Automotive Technologies EBIT waterfall
growing significantly with these players. And if we would include bearings in China, which had a significant outperformance, then it would look even better. So, on the right side, in the EBIT waterfall chart it’s displayed, also the big adjustment for the inventory evaluation, you see it in the colu
Slide 27: Vehicle Lifetime Solutions detail
Let’s then jump to Vehicle Lifetime Solutions. Not much to add to what Klaus already said. Shining star. Sales up in all regions. A strong EBIT margin driven by volume and also positive pricing carryover from last year. And you see in the waterfall chart, in Others, only a slight inventory valuation
Slide 28: Bearings & Industrial Solutions detail
And last but not least from a divisional side, Bearings & Industrial Solutions. I think the sales development in all regions except Americas reflect the difficult market circumstances. Klaus said it, especially China Wind is also reflected here with minus 9.8% for all of China. And then on the botto
Slide 29: Net income, ROCE and value added
Net income on the next slide. Obviously, as you see, significantly increased over prior year. ROCE and Value Added in a good range, with 12% in the corridor of our standalone Mid-term Targets that will be discussed on a later point. 29 PUBLIC
Slide 30: Free cash flow
And that leads me into Free cash flow. Free cash flow is negative, as expected, due to seasonal increase in the working capital, also a strong sales development in Vehicle Lifetime Solutions. Vehicle Lifetime Solutions always carries relatively more inventory than, for example, Automotive OEM. I thi
Slide 31: Debt and leverage
This brings me to my last page. I pretty much explained it already in explaining the interest development. On the prior page you see Gross debt increased significantly. That is EUR 1.4 billion for the acquisition of Vitesco shares and also if I look to prior years, there’s also some of the Ewellix f
Slide 32: Agenda
mWwWNDN = Overview Business Highlights Q1 2024 Financial Results Q1 2024 AGENDA Outlook 32 PUBLIC
Slide 33: Guidance confirmed
Klaus Rosenfeld Thank you, Claus. Claus is always a little bit humble when it comes to his own achievements. I would like to add that the Finance team, led by the CFO, has done a fantastic job here to refinance everything. We are done with that. From my point of view, really a great example how you
Slide 34: Summary and strategic logic
You have a summary page on 30. I am not going to repeat all of this. The only thing I want to say here, the idea and the strategic logic of the transaction clearly is intact. Yes, there may be a little bit of a different dynamic in terms of how fast E-Mobility is going to come. That does not change
Slide 35: Upcoming dates
On 31 you have the next dates. May 15th, a Virtual Autos Trip with Citi. Then, on May 22nd the European Champions Conference in Frankfurt, from Deutsche Bank. J.P. Morgan on the 4th, where Matthias is going. 6th is Claus in Hamburg. And then on June 11-13th, I will participate in the Deutsche Bank G
Slide 36: Closing remarks
continuing to contribute proudly to the success of Schaeffler. Thank you very much and let’s hand over to the Q&A session. 36 PUBLIC
Slide 37: Q&A session: Akshat Kacker, JP Morgan
Q&A SESSION Akshat Kacker, JP Morgan Good morning. Akshat, from J.P. Morgan. Three from my side, please, the first one on Industrial Solutions. You mentioned that the Orderbook is bottoming and that the market pressure is declining. Could you just talk about your expectations for organic growth in t
Slide 38: Q&A: industrial markets and Wind
Raw materials, that is again very much linked to the economy and Industrial Automation is below, as also Power Transmission, and Wind has the biggest setback in terms of growth, as we explained by the China development. We could now go through the different areas, and I think Claus said it. If you j
Slide 39: Q&A: gross profit drivers
So, what you have in Gross Profit, in the plus EUR 46 million, is still the positive inventory valuation effect. You really should, to see the real operational effect, net the two columns, Gross Profit and Others, and then you see and come up with a net tailwind. It’s still a significant tailwind in
Slide 40: Q&A: pricing in Automotive
have achieved. Input costs are not going down. They are not going up as much as in the past but they are also not relaxing. So, therefore, we have to keep the pricing. And we did not see in the first quarter the normal contractual price reductions that you normally see in Automotive Technologies. So
Slide 41: Q&A: pricing and platform longevity
The second question, coming back on pricing in Automotive Technologies and with ICE and PHEV platforms probably running for longer than perhaps had been expected half a year ago or one year ago. Is this something where you see opportunity for you to improve pricing when customers approach you, that
Slide 42: Q&A: China and E-Mobility orders
that they want to have at least one European or international player as an alternative. And think that’s the position that we want to take. So, we are not going to leave it. Others have decided, on our competitors’ side, to leave that market. We think that is wrong. And we know and trust our Chinese
Slide 43: Q&A: PHEV and BEV order intake
very interested that that situation is resolved and, again, ask the question tomorrow and you will hear probably more about this. In terms of Order Intake details. No, we are not splitting it up into BEV and plug-in hybrids. You know that we include the plug-in hybrids in our E-Mobility side. If you
Slide 44: Q&A: reporting transparency
divisions, E-Mobility, Powertrain & Chassis, Vehicle Lifetime Solutions. You will get not only top line, you will also get margins for this. Maybe we’ll regret this move at some point in time, I don’t know, but there will be more transparency on the drivers of that business and then you can also see
Slide 45: Q&A: Order intake and portfolio review
Klaus Rosenfeld Let me start with the first one. The EUR 1.5 billion Order Intake, you have it on ten, includes a nomination from a new OEM for an e-motor and an inverter in our Heavy Duty business. We have so far not differentiated this in BEV and plug-in hybrids. If I may, Edoardo, I would also le
Slide 46: Q&A: OEM volatility
Edoardo Spina, HSBC Thank you very much. Maybe a very, very quick follow-up. It seems that, of course, there is a lot of volatility in the forecast figures just in the industry. The question is are the OEMs starting to recognize and acknowledge the volatility and risk for you when you sit down for n
Slide 47: Q&A: order intake and closing thanks
Claus Bauer Bearings are not included in the Automotive Technologies Order Intake anymore because these are KPIs that are division-specific and with the re-definition of the composition of the division. So, last year Automotive Bearings was in there but from now on it’s not in there, so Automotive B
Slide 48: Backup
Backup We pioneer motion SCHAEFFLER SCHAEFFLER 48 PUBLIC
Slide 49: Transition year 2024: adjusted comparative figures 2023
BACKUP SCHAEFFLER Transition year 2024 - Schaeffler transitory operating model and reporting Adjusted comparative figures 2023 Automotive Technologies. in eurmn Bearings & Industrial Solu Key Aspects * Automotive Aftermarket and Industrial divisions are renamed Vehicle Lifetime Solutions and Q123 Q2
Slide 50: Key figures Q1 2024
BACKUP SCHAEFFLER Key figures Q1 2024 Qi 2024 in EUR mn Q1 2023 Qi 2024 vs. Q1 2023 Sales 4,152 4,085, 1.6% 0.0%" Gross Profit 959 1,086 +127 mn Gross margin 23.1% 26.6% +3.5pp EBIT? 335, 322 -13mn EBIT margin? 8.1% 7.9% -0.2pp Net income? 128 231 +103 mn EPS¢ (in EUR) 0.19 0.35 40.16 Schaeffler Val
Slide 51: Working capital, capex and financing structure
saceue SCHAEFFLER Working Capital ratio 21.0% - Capex ratio 5.4% in Q1 Working capital’ Capex? ineURmn in EUR mn ; 3,309 3,413 3,223 3,165 3,030 221 247 222 198 Qi Q2 Q3 Q4 Qi Qi Q2 Q3 Q4 Qi 2023 2023 2023 2023 2024 2023 2023 2023 2023 2024 in % of Sales (LTM) in % of Sales 20.0% 19.3% 20.4% 18.6% 2