Ladies and gentlemen, welcome to the HELLA Investor Update after our release today. This call will be hosted by Bernard Schäfer-Barthold, CEO, and Philippe Bienais, CFO of HELLA. At this time, all participants are on a listen-only mode. The floor will be open for your questions following the presentation. Let me now hand the floor over to Bernard Schäfer-Barthold, the CEO of HELLA.
Yeah, good evening to all of you on behalf of Philippe and myself. Thank you very much to join us here on a very short notice to this extraordinary investor call. So the purpose and reason of this call is the need of the adjustment of our outlook on the fiscal year 2024. So if we look at the market and the industry environment, we can say that we have been in a very challenging environment since the beginning of the year. Volumes have declined in comparison to the estimates early January. So we expect market at around -2% in comparison to -2% down in comparison to beginning of the year.
But even more important for us is that we have again seen very strong delays in terms of new series launches. So ramp ups were by far slower than expected or even have not happened in total. In addition, a slowdown, a temporary slowdown, I have to say, on electrification, which impacts us and specifically in electronics a lot. So overall, a very negative sentiment also related to China, where especially the international OEMs have been much weaker than we expected.
So in terms of our internal sales planning, we are around 6-7% lower than what we originally expected at the beginning of the year, and this is in absolute terms. It's around 500 million EUR, which we are not able to compensate overall. So this forces us to revise our outlook. The view has even deteriorated much in comparison to what we expected releasing our half-year numbers in terms of the sales expectations, and especially also the recent event like the flooding in Eastern Europe have an impact, which we see is slowing down somehow, especially now on our European customers' volumes.
So the need now and our reaction is already since also the beginning of the year that we are accelerating and trying to accelerate on the measures to improve our cost structure and improve also our net cash flow. I will come to that a little later. So if we look now at the new outlook we are giving in terms of our sales, we are now predicting to be around EUR 7.9 billion-EUR 8.1 billion. Our prior guidance we have given was between EUR 8.1 billion and EUR 8.6 billion, where we specified this guidance with the release of our half-year numbers to the lower half of this range.
In terms of the operating income margin, we revise our outlook to a range between 5.5%-6%. The prior range was between 6%-7%, and we also specified this range after the mid of the year to the lower half of the given range. And in terms of net cash flow, our actual outlook is between 2.2%-2.7%, and the prior range was approximately at 3%. So what are now the measures we are taking? As I said, we will continue on reducing our cost base, and we will work on additional measures to improve our net flow, our net cash situation. So what are overall the focus areas, huh?
So one is that we are working on improving and on growing and outperforming the markets in the Americas and as well in Asia. And there, specifically, we are clearly focusing on expanding our business activities in terms of the Japanese market, but also the Indian markets. And we are continuously increasing our position in terms of the Chinese OEMs. We mentioned already that already this year we have increased significantly the order intake outside of Europe, so around two-thirds in the first half was related to business we have won outside of Europe. We won very significant orders in the Americas. We recently announced that also via press release for our electronics business as well, for our lighting business in the US with US OEMs.
Additionally, we had significant acquisitions also for China and as well for India already, which should improve and boost our sales in the next years outside of Europe. Clear target and ambition for us is to get more balanced in terms of our regional setup. This focus we will continue to have, and it looks like quite promising in terms of the business expectations we have in these regions. Secondly, we are working on a further reduction of our cost base. We are accelerating our efforts in terms of the competitiveness program we announced for Europe. We are ahead the plan in terms of reducing our cost.
More than that, we are revisiting the overall cost structure, globally, and we are continuously working on improving and increasing the synergies we're able to realize together with Faurecia. So overall, if we look at end of August, we already reduced globally around one thousand five hundred people out of a basis of around forty-one thousand people in the first eight months. We are able and we're able to significantly reduce the overall external services we buy on R&D and focus more on internal services. So our R&D ratio is step by step going down.
We are quite confident to bring this R&D ratio back to a level below 10% already in 2025 by working on improvements on efficiency and productivity going forward. Overall, we are able step by step to reduce our overall cost structure in comparison to 2023. We will be able in 2025 to reduce our overall cost structure by around 120 basis points. Overall, that means that we target to reduce our cost structure in absolute terms in 2025 in comparison to 2024, so all measures are in progress, and we believe that this acceleration will support us in improving our profitability already in 2025 with the contribution also of the synergies we are able to improve.
If we look at the additional efforts we then do to optimize our cash flow, so we continue to work on reducing our tangible CapEx investments already in 2024. To the end of 2024, we will be able to reduce the tangible CapEx level by around 15%. So we are working on clear focus and prioritization on investments to do so we have taken as well the decision not to invest into further buildings and new constructions in Lippstadt, which was a significant plan also in the next years to come. We will and continue to work on having a higher utilization of our capacities of our equipment today.
Today, we still have a big underutilization of our equipment. Our plan, especially for Europe, which was presented also, and which was decided for lighting and the concept in terms of our global operational footprint, will support, with the measures we are taking, with the standardization, with the focus of the plans on the different technologies, will support a more flexible approach and a higher utilization also going forward. So a clear target to come down in terms of CapEx ratio already also in twenty twenty-five. In terms of working capital, we still and again see a good improvements we are able to do, as we are implementing and rolling out now a new operational shop floor system, which we call Forvia Excellence System.
It's a, it's the, let's say, best of both worlds of Faurecia and Hella, which we now implement, and which should contribute, on one hand side, to a higher productivity and efficiency in our plants. But with the flows and better flows, it should also support our inventory management and further bring our inventories down. So overall, we are working and accelerating on all these measures. So to sum it up, on the takeaways, so in this environment, so I explained why we had to adjust our outlook.
The basis is the strong delays also in the new SOPs, which have a strong impact, but also the very low volumes on electrified cars as main reasons. In terms of 2025, our assumption is that we assume that even in 2025, we should continue to see a very challenging market environment. Our basis hypothesis is that we do not assume any volume recovery on the short term in 2025. We think that the volatility will remain high, and the uncertainty, especially for Europe, will remain high as well. This is why we are strongly working on reducing our cost structure, as I said.
So, as of today, and at this point of time, we have, for these reasons, also no concrete outlook now, for 2025 in terms of sales, operating income, and net cash flow. So the new outlook and the guidance on 2025 will be published, and as we have done it this year, in February, so February 2025. We continue to focus, as I said, on rebalancing our business. We see significant opportunities also, which we have under negotiations, so that we are quite optimistic in terms of already, let's say, the successes we had now recently in the first month, so that we're able to continue on that way, also going forward, and rebalance our business, regionally, midterm. In terms of our cost structure, clear focus on bringing costs down.
We are on track on working on the different measures. A clear aspiration and ambition for us is an absolute cost reduction in comparison to this year for twenty twenty-five, and an improvement in cash flow by further reduction of CapEx and a further improvement of working capital. On the upcoming events, so we will publish our preliminary nine-month figures on the seventeenth of August. The full report on the third quarter will be then on the sixth of November. We will host an analyst meeting on the twenty-seventh of November. And then in February twenty-seventh, we will have our preliminary announcement, and together with the outlook, as I said, on twenty twenty-five, and the publication of full numbers, the tenth of March. So thank you very much.
This is all in terms of the presentation, and Philippe and myself are happy to take your questions.
Thank you very much. Ladies and gentlemen, if you would like to ask a question, please press nine and star on your telephone keypad. In case you wish to withdraw your question, please press nine and star again. We kindly ask you to limit your questions to a maximum of three. Thank you. One moment for the first question, please. And first up is Christoph Laskawi from Deutsche Bank. Over to you.
Thank you for taking my question. Good evening. The first one will be on your comment on deteriorating market conditions. Is that only for the SOPs that you're seeing, or is it in general, also for the rest of the business, which is running full steam other than that? And then is it essentially only Europe or across the globe? Then the second question will be on recoveries, disputes with the OEMs. Are you becoming slightly more cautious, something factored in, in the guide for that as well, or is everything well on track and you are seeing good progress in the negotiations? And then lastly, just because you mentioned the environment remains very challenging. Does that trigger on your end, potentially, another portfolio review?
Could you see yourself also exiting certain parts of the business that you're currently in, or is it too early to debate that, and you're actually currently fairly happy with the product footprint that you have? Thank you.
Hello, Mr. Laskawi. So, thank you for your question. So the, on the SOPs, so the SOPs are the most relevant for us in terms of the sales deviation. There, the effect is mostly for Europe and the Americas. If we look at China, China is more, let's say, a weakness of the international OEMs, which is impacting us. This is more than, let's say, customer, customer mix for us. But the most relevant is for us, Europe, China, with the international customer mix, Europe with the electrification and the SOP delays, and the US, it's mostly the SOP delays. In terms of the recovery, I think this year, we are still not fully settled, in terms of the, of the negotiation.
The biggest part is done, but as I said, there's still, let's say, some negotiations to be finalized. In general, I would say that the debates and the dialogue gets more difficult with the OEMs, so it's clear the market environment is getting more intense, and this, let's say, makes the discussions even more difficult to find a settlement, even our position is very clear, and from our point, the case also is very clear in terms of the claim we have, but again, to your question, the sentiment is getting, or the discussions are getting more intense.
On the portfolio, I think that yes, there are decisions for us to take, but more towards, let's say, opportunities we see in the market, in terms of, let's say, new technologies, new products, we have where we will have to make our choices where to invest, no? So it is, this is very clear, no? So, let's say feedbacks we have from the customers is that they see us in even more products and trends and technologies, going forward, and the question is, are we able to deliver all, no?
The portfolio decisions are less related to, let's say, actual technologies and products we are in, more towards future next generations and extensions of our technology portfolio going forward.
Thank you. And one follow-up, if you allow.
Mm-hmm.
Just on your comment that you book two-thirds of the business outside of Europe in H1. You already said that you will step up the right-sizing efforts of the cost footprint and also the industrial footprint. When we think down the road, because the order intake points obviously towards the rebalancing of the business, are we debating full plant closures in Europe, more sizable ones, or is it too early to have a discussion on that?
No, as of today, we are not planning any sizable closures, no. So we also think that we will be able to grow in Europe. So in our setup in Europe, especially if I look at electronics, is quite solid. So there, the underutilization is, let's say, not the biggest issue. And in terms of lighting, what we are now doing and adapting now in terms of Lippstadt and taking also the, let's say, the operational changes we are now doing in the different plants in Europe, I think we will be well positioned there. So there is no further sizable closure planned as of now.
Thank you.
At the moment, there are no further questions. So if you have additional questions, please press nine and star now. Please press nine and star if you would like to raise a question. At the moment, there are no further questions.
Thank you very much for joining this call and being interested in Hella. I wish you a very nice evening and hope to see you or speak to you soon. Thank you.