Good morning, ladies and gentlemen, and welcome to the HELLA investor call on the preliminary results for the fiscal year 2025. The call will be hosted by Dr. Peter Laier, the CEO, and Philippe Vienney, the CFO. 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 host, Dr. Peter Laier, CEO.
Yeah, thank you very much. Good morning. A warm welcome to everybody for our call in regard of HELLA's 2025 preliminary results. We have structured the presentation today in four parts. If you could go to the next slide, please. The first is an introduction of myself, 'cause I'm newly assigned as a CEO of the company. The second will then be focused on preliminary results 2025, followed by a company outlook and strategic priorities. At the end, then, we will summarize the key takeaways for all of you and then open the call for questions. Yeah, let me start at first with a brief introduction of myself. I'm now since, somehow three decades, if you could go on slide four, please. Thank you.
I'm now since around about three decades in, in automotive industry. started my career at Continental Automotive, where I used to work 13 years in electronics and sensorics. used to work in, in Asia, leading the Continental Automotive business in Japan and Korea, then were responsible for chassis and for brake systems. After that, I joined Osram in 2013 as a CTO. did the spin-off with the board of Osram at that point of time, after that, joined Benteler as a COO of the company.
The next stage was Knorr-Bremse, as being board member responsible for the commercial vehicle business, and joined ZF Friedrichshafen, where I was responsible for commercial vehicles and industry business and for operations and purchasing for ZF globally. Now being assigned as a new CEO at HELLA since 16th of February, pretty new in this role. In that role, I'm pretty happy to welcome you here in this first preliminary result call for the HELLA results of 2025. Let's look to the preliminary results. If we could go further in the presentation on chart six. Thank you. To summarize, the organic sales of HELLA in 2025 were somehow stable with EUR 8 billion.
2025 was characterized by strong net cash flow performance and an increase of profitability. How does it look a little bit more in detail? As I mentioned, the HELLA Group organic sales were at prior year level of around about EUR 8 billion, including a negative FX, down by 2.1%. We had a strong sales development in electronics across all regions. For example, notably driven by our radar sensor business, our Battery Management Systems, and our car access, to just give some examples of growth. On the other side, our lighting business was affected by the phase out of some programs, which we partially could compensate by a ramp-up of new headlight and rear combination lamp business in this business group.
In Lifecycle Solutions, we had a positive organic sales development in second half year, 2025. That resulted in an operating income for HELLA in 2025 of EUR 474 million, in comparison to EUR 446 million in 2024. This resulted again in an operating income margin increased by 48 basis points to 6%. What we see is that the acceleration of our cost reduction measures with savings particularly in R&D drove efficiency and with that, structural adjustments. On the other side, the positive effects out of those measures were partially influenced by negative volume and mix effects, and that resulted in the mentioned operating income and margin.
If you look shortly to net cash flow, we increased the net cash flow in comparison to 2024 by EUR 129 million, to a remarkable level of EUR 318 million in 2025. That led to a ratio to sales of 4%. In regard of net cash flow, and that in comparison to prior years, we have 2.4% significant increase. We had a higher cash flow on the one side from operating activities, EUR 58 million improvement, and the other improvement came out of CapEx savings, a part of our improvement program, EUR 105 million savings here. In regard of order intake, we had again, EUR 10 billion, which is showing a strong demand for our core products as well as for our innovations.
If you look a little bit deeper to order intake, what we see is an intensified business, which we could achieve in North and South America, with, on the other side, with local OEMs in China, some gains in Japan and in India. That leads to an overall more than 50% share of order intake outside of Europe. This shows that we have a strong demand for our HELLA core products and our new technologies, for example, like intelligent Power Distribution Modules or sonar modules, some of our core innovations and new technologies. If you look now a little bit deeper in the business groups, I hand over for that to Philippe Vienney, our CFO. Philippe, please.
Thank you, Peter. Looking at some more details per business group, let's start with Lighting. Lighting, we had total sales in 2025 was of EUR 3.7 billion versus EUR 4 billion in 2024, with an operating income of EUR 106 million, which represent 2.9% of sales versus 3.2% in 2024. In Lighting, we are suffering from discontinuation and very large volume series project, especially in America and in China, which are going down, which is impacting the top line of Lighting. We have also to face some weakness in the European market on some specific products impacting the lighting business group as well.
On the other side, we have some ramp-ups and increase of volumes for U.S. OEMs, which is not enough to compensate the sales drop that we are facing in China, in Europe, and in Europe. At the end, the operating margin of Lighting is at 2.9%, against EUR 106 million. Mostly impacted by the volume and the loss of revenues, which is impacting the gross profit, which have been partially offset by some structural measure on SG&A and R&D, not enough to sustain the margin that we have posted in 2024. When we look at Electronic segments, here we are reaching sales of EUR 3.4 billion versus EUR 3.3 billion in 2024.
Operating margin at EUR 269 million, which is representing 7.8% of sales, versus 6.9% in the year 2024. Here, the sales are still highly driven by radar and Electronic Power Steering, mostly in Americas and in Europe, so which is benefiting to the top line. We have also a good startup with the smart a ccess system, in Europe and in Asia. We have also in China, the low-voltage battery, which is also ramping up and adding assets as well. Here we have an operating margin of 7.8%. The volume is helping us a bit. We have also had the SEK sales or tooling sales, which have helped us in Q4 to increase the margin.
We are also spending much less in R&D, and we are doing some saving in administration as well, which is helping the operating margin versus what we have been doing in 2024. Looking at Lifecycle Solutions, here we have sales which are nearly stable at EUR 1 billion, like in 2024, with an operating margin at EUR 109 million, which is 11.1%. Here we have basically a stable market or stable sales on the spare part business. Reported sales is slightly negative due to FX, but the activity is mostly stable on the spare parts. On the other hand, we have lower demand on the commercial and agricultural businesses.
But we have some rebound or some slight increase in H2 2025 on this market, which is which has helped a little bit the year 2025. Operating margin at 11.1%. Here we have an increase on the gross profit due to the savings and the restructuring plan, which has been undertaken in, in this DG. We have also some savings on the R&D side and distribution costs, which have also helped the operating margin. Now, if we look at bit at the demand and the order intake, I hand over again to you, Peter.
Thanks, Philippe. Yeah, if you could go to the next slide, you see there are some order intake highlights for 2025. As I already mentioned, more than 50% of our order intake share came from regions outside of Europe, and that you will see as well in the different business groups. Let me start with Lighting. We had some further acquisition successes in the Americas as well as in Asia. You see here on the chart some examples, like, for example, car body lighting and headlamp business for different mass market models for European OEMs. I think that's an important message, that we are penetrating further the mass market now as well with the lighting business.
We want some headlamp packages for different models of European OEMs, for the U.S. market, with SOPs in 2028 and 2029, and some headlights, packages, including adaptive lighting technology for three different series, of an U.S. OEM for SOP in 2028. I think remarkable in Lighting is as well, that we want different headlamp and car body lighting packages for Chinese OEMs, for several car models, with SOPs in 2026 and beyond. This is executing of our strategy that we want to grow with, with Chinese OEMs and confirms that we are here on the right path. If you look to, to Electronics, we are further winning business to reinforce our position as a market and technology leader in the selected areas where we are going to play and win.
You know that we have a long tradition in selecting those areas, carefully and play to our strengths. You see here as a first example, we have 1 billion orders for intelligent power distribution management and zonal modules from an international premium OEM, with SOPs staggered from 2025 and 2028, which is remarkable. That's confirming our strategy in regard of going in the direction of zonal modules or ECUs. We continue with our success story on, on radars, with a 3 million-digit order for our Gen 5 and Gen 7 radar technology from a European OEM. Gen 7 radar solution for a Japanese OEM for the India market, with a SOP in 2027. In addition, a 3 million-digit order intake for smart car access from a U.S. OEM confirms here that we are here on the right path.
If you look, look to Lifecycle Solutions, we have new order wins, which increases our customer outreach, and which clearly indicates that there is a strong demand for our customized technologies. For example, we have won a fully customized FlatLight technology for a Dutch bus maker, or a customized lighting for an off-road vehicle of a premium manufacturer with SOP in 2026. We have different LED front lighting systems, which we won for a European OEM for the Indian market, or a LED rear lamp for international trailer manufacturer for the Indian market, which confirms as well here, the internationalization of our business. Last but not least, we won a LED headlamp from an international manufacturer for agriculture technology, with a SOP in 2027.
Yeah, so far to our 2025 preliminary results and related informations for, for order intake. I would now go into 2026 and would start to talk about our outlook for 2026, followed then by some strategic priorities. If you could switch to page 10, please. What I would just start with is we, we are seeing somehow sluggish, stable development of our vehicle production globally, and the details will be presented by Philippe. Philippe, handing over to you.
Thank you. Yes, we see a stagnating market in 2026, based on the latest figures published by the S&P in February 2026. - 0.2% in 2026 versus 2025, after 2025, which was relatively good in terms of worldwide production. Per region, we see Americas, Europe, and even Asia-Pacific going slightly down versus 2025. With this outlook in terms of market, we go to the prognosis or the outlook for 2026 for HELLA. We see we would like to say, to guide the sales between EUR 7.4 billion and EUR 7.9 billion. Here again, taking into account a stable market and still facing some top-line revenues issues on Lighting.
We have detailed in from the call that we are expecting a rebound for Lighting in 2027, so we are still facing this drop in revenues in 2026 for Lighting. Leading us to this guidance in terms of sales, EUR 7.4 billion-EUR 7.9 billion. Operating margin between 5.4% and 6% of sales. Also, taking into account these revenues, which will be slightly difficult for Lighting. And also having in mind that the full benefit of the turnaround plan of Lighting, with the adjustment measures and structural measure will take full impact in 2027, and 2026 will be still the turnaround year. In terms of net cash flow, we say at least 1.8% of sales.
Here versus 2025 achievement, basically, this 1.88% is built on slightly lower funds from operations. We also do expect more cash out linked to the restructuring program with, let's say, people leaving in 2026, then the cash will be out as well in 2026, higher restructuring spend in 2026. We also do plan some higher CapEx in 2026. We have said that we have been able to reduce the CapEx in 2025 by EUR 100 million. We do not expect to do exactly the same in 2026, we are planning to add EUR 50 million more, I would say, in 2026, in terms of CapEx, to prepare the future, the launches and the rebound, which is expected in 2027.
That's all you know, what is behind this outlook for 2026. Maybe then we can go to the strategic priorities to the years.
Yeah. Thank you, Philippe. Then I'm taking over for, for that again. In regard of our strategic priorities, if you go to chart 12, please, you see, three strategic priorities which determines HELLA. The first is Best in Class Performance, the second is Business Transformation, and the third is Invigorating Culture & Organization. If you look a little bit more in detail to Best in Class Performance, that means for us, we need to secure best-in-class execution across all business groups and functions and improve cash flow, 'cause this brings us in a position to further invest in the future-proof positioning of the company and in our growth areas.
That means we have started a program in the company to simplify all functions to a level of functional excellence on the one side, and as you have seen in the figure presentation of Philippe, we have to transform our lighting business, and here we have a strong focus on. In addition, we will continue our competitiveness program, where we see already first improvements out of that in the results of 2025, and we will continue in 2026 and do some further structural adjustments. In regard of Business Transformation, we will diversify further our regions and our customer base, so we want to become more international, and the acquisition of more than 50% of non-European businesses, showing that we are already on a good, good path.
With that, we want to strengthen our resilience and with that, we want to focus on further growth and a future-proof portfolio. That means we will do rigorous portfolio management with focus on growth and affordability and with clear priority setting. We will achieve a lower dependency on the European market and strengthen the relationship, specifically with Asian and American OEMs, we will further de-risk our global supply chains. In regard of Invigorating Culture & O rganization, we will develop our culture further with a clear focus on the pair of empowerment and accountability, and further simplify our structures. That means we want to reduce our complexities in our organization and streamline the processes, we want to further establish and strengthen regional teams to access local customers, which supports then the mentioned internationalization, where we are focusing on.
We will reshape our engineering organization towards the digital age, including using of AI. If you go to the next chart, let's look a little bit deeper what that means as focus for our business groups. For Lighting, in regard of Best in Class Performance, we will definitely focus on affordability of innovations, on simplified functions, and reduced development lead times, specifically with a focus on Chinese OEMs. We will work further on competitiveness in regard of Lighting, and that has a strong focus specifically on the transformation of our plans in Europe and in the Americas. In regard of Electronics, we will do a Best in Class Performance and enhance regional footprints and focus on R&D efficiency. Then we will work on CapEx and resources.
We will allocate our invest in CapEx to the strategically identified selected growth segments. I will talk a little bit more about that as well on the Capital Markets Day tomorrow. On Lifecycle Solutions, we will consequently use digitalization and leverage AI, and we will further work on our functional excellence and adjust further our footprints in operations. If you look then to Business Transformation, diving deeper in the business groups, that means for Lighting, very clear, highest focus is that we have to transform Lighting and achieve a turnaround over there to improve margins again sustainably.
We will work on a future-proof product portfolio. That means specifically that we want to address much more the volume segments of the lighting market. We will work further on balancing our customer mix. That means specifically working with Asian customers and penetrate more the market in the Americas. In Electronics, I think we have unique capabilities and know-how in the company. We will leverage them specifically in regard of battery and power modules for all different electronic electric powertrain vehicles. That means from mild hybrids to plug-in hybrids, range extenders, to full battery electric vehicles, where in all areas, this battery and power modules are needed for efficiency.
We will use our scale as a first mover to roll out modules, where, as I mentioned before, where we have already remarkable business wins, and we will focus as well here on business wins in the Americas and in Asia. In regard of Lifecycle Solutions, Business Transformation, focus for us is, on the one side, we will start further product initiatives in the independent aftermarket. We will extend our focus to the mid-price segment and leverage our channel here, and as well here, we focus on international growth in North America and India, specific. If you look to Invigorating Culture & Organization in Lighting, we will implement a new leadership model in all areas, not only in Lighting, and we will implement organizational responsibilities for, for our people in an enhanced manner.
That is the part of empowerment I talked about before. We will work in all business groups on digital AI tools, which we will implement, and we will streamline the decision-making and increase internationalization. Based on that, if you look to the next chart, in regard of our midterm targets, in regard of Lighting, if you can go to the next chart, please. I think you see the presentation, anyhow, I will continue. In regard of Lighting, we will transform the business to a sustainably improved profitability situation, and we will broaden the customer base. Based on that, we will further act as a top player in the market, but serving both in the future, premium and volume segments.
In regard of Electronics, I already talked about our unique skill and know-how assets, and with that, we will further expand the business systematically and increase profitability. We will here clearly select our business arenas carefully and, with that, further realize a profitable growth. That means we will use our technology leadership, and with that, grow disproportionately in those areas which are characterized by innovation. Last but not least, in Lifecycle Solutions, we will leverage our market position, our channels to the market, and our brand, to sustain double-digit margin, and with that, we will play here in the top 10 independent aftermarket player league, and in addition, working on further commercial vehicle business and work as a workshop product supplier here further. With that, I would like to come to the key takeaways.
As a summary, if you look to 2025, I think we can summarize that that was overall a solid performance of HELLA in financial year 2025. Page 16, please. Can you go on 16, please? Overall, a solid performance in financial year 2025, with stable sales at EUR 8 billion, supported by growth in Electronics. We have an increase in profitability, driven by acceleration of cost reduction. In addition, we had R&D savings and increased efficiency. This led to a significant improvement of net cash flow, driven by the mentioned operational performance measures and CapEx savings. With that, we met the financial outlook for 2025 fully.
If we are now looking to outlook for the financial year 2026, as I mentioned, we are not expecting tailwinds from the market, and based on that. Our outlook for 2026 financial year is a sales between EUR 7.4 billion-EUR 7.9 billion, and OI margin between 4.5%-6%, and a net cash flow to sales ratio at least at 1.8%. To remind you, our outlook is based on around 92.8 million light vehicle produced. As mentioned, we are still expecting a volatile and challenging industry market situation for 2026. The three strategic priorities going forward are Best in Class Performance across all business groups and functions, the Business Transformation to strengthen the resilience of our business model, and the Invigorating Culture of empowerment and accountability.
Yeah, with that, I would like to close our presentation part of preliminary results of HELLA in 2025 and the outlook. With that, we are opening the floor for questions, handing back to the operator at first.
Thank you. Ladies and gentlemen, please only use the telephone for question, and we would like to ask, you to limit the number of question to three. If you would like to ask a question, please press nine and the star key on your telephone keypad. If you would like to cancel your question, please press three and the star key again. Please press nine and the star key on your telephone if you would like to ask a question. We have the first question from Sanjay Bhagwani, from Citi. The floor is yours.
Hi, thank you for taking my question also. Maybe the first one, just zooming into a little bit on the guidance. So is, is the guidance, I mean, I mean, generally, what we have seen over the past few years is, is HELLA generally tends to be a bit conservative on guiding, but manages to get to more or less to the upper end of the guidance range for most of the years, except for what we have seen in 2021, 2022, which was semiconductor crisis. So is there some element of conservatism baked here, or is the Lighting, I understand you mentioned as a key driver here.
Just trying to understand how much of that is conservatism, and what do you think for the lighting, how bad it can be for 2026 before it gets better in 2027? That's my first question. I'll just follow up with the next one then.
Yeah. First, thank you, Sanjay, for the question. Maybe I'm starting and then hand over to Philippe. 2026 will be, again, a year with challenges for our lighting business. As we mentioned, we have a continuation of some big business, which is further influencing sales in 2026. For Electronics, as well as for Lifecycle Solutions, we will be at least stable in this year. Then we have to consider the challenging markets conditions we mentioned in the presentation that brought us basically to the top line guidance on the level as you have seen. Furthermore, Philippe, handing over to you.
Yeah, it's true that, the, the guidance is, is, is coming from Lighting, where we see the, the further sales drop, which is more or less representing the full, drop, for next year in 2026. Lighting is really, the, the driver of the, of the, this guidance, which could be seen as a, as a, as a, a low guidance, but that's the, the, the main impact is, is basically lighting.
Thank you. That's, that's very helpful. If, if, if you think, like, if Electronics and, and the other division is stable, then if, if you just back calculate, what we get for Lighting is roughly 9%-10% decline in top line. Is that? Is there a specific program which is driving this? Or it's, it's best brought by some, some specific. Maybe if you can just recap us, what is driving Lighting down for 2025, and, and, if this continues at a 10% rate in 2026, is that your assumption?
Yeah. We, we, I think we continue to see the same trend as we had in 2025 and started to see in 2024. We, we continue to have some reduction in in China, with some again, large programs, which are still going down, not fully replaced. We also have some weaknesses in in Europe, which is also the case in 2025. We continue to see the same trend. Again, some additional sales coming from North America, but as in 2025, not enough to fully compensate the drop that we will face in the other two regions. Yeah, the the new, new programs that we have been able to to get will really give us the impact in 2027.
That's why the 2026 is still continuing on the same path as in the past for, for Lighting.
Thank you. That's, that's very helpful. Lighting is very clear. For the other divisions, in terms of margin expansion, are you expecting any other, like, the cost-saving programs, may, may feed into, feed, feed into some sort of margin this year, for Electronics and LCS?
I think, as you have heard, we have started our improvement program, and, this improvement program will have as well some related costs, which we will see in 2026. Therefore. we have in 2026 some influences out of that, which is as well then seen in the bottom line performance, but that will then be the basis for further improvement for the years after that.
Thank you. That's very helpful.
Thank you. If you would like to ask a question, please press nine and the star key on your telephone. We have one more question from Thomas Besson from Kepler Cheuvreux. The floor is yours.
Thank you for taking my questions. Good morning. First, I'd like you to help us bridging the performance in Q4 versus the message you had given in Q3. Clearly, vehicle production was stronger, but there seems to be more than that. I mean, at Q3 stage, you had said that Lighting would be probably as bad as in Q3, and it proved to be a lot better. You mentioned some tooling support in Electronics. Could you give us a magnitude of that figure and explain if there's any one-off related to R&D reimbursement or something helping Lighting in Q4 versus expectations? That's the first question.
Yeah. It's, it's true that, basically, we had a, the, the Q4, SEK set and green were more or less 50% of what we have been, cumulatively until end of September. Strong, strong activity on the, on the, on the tooling and the end sets, which are also have been in Q4. We have saw some, finally, some adjustment on, on, on claims and pricing also, which have been materialized in Q4, for IT, which has also helped a little bit, the Q4 results.
Okay. Thank you very much. Coming back to the previous questions, I mean, you're suggesting that Lighting is entirely responsible for the guidance for lower revenues and profitability. Do you expect these adjustments you've mentioned for Lighting not to be sustained in 2026 and, therefore, margins in Lighting to decline? I'm not sure I understand. Can you confirm that you are making no assumption in terms of perimeter on the guidance?
Yeah, Lighting we, we, we do. The tooling sets and SEK sets are more or less, are not, let's say, are more one-off sales or are not a part of the, it could be fluctuating from one year to the other. The second point is the, all the benefit from the turnaround plan that we are implementing in Lighting and the restructuring and structural adjustment will have a benefit. It's, as I said, it's also part of the. The restructuring is still going on. We're gonna have some head count reduction really implemented in 2026. The full effect is probably more coming in 2027 than in 2026. 2026, we would have a partial effect of, of the restructuring plan and the, and the turnaround plan, turnaround plan.
Thank you very much. Another question on input costs. Can you say a few words about what you are assuming in terms of headwind? I mean, we've seen steel, copper prices, memory prices, even the access becoming more complicated. Can you share with us what you've assumed in the guidance and whether this may eventually complicate the task of improving Electronics margins as well in 2026?
Yeah. I think you are referring to the inflation, the material price inflation.
Yes.
Which we, we see, more or less, now at a not, not new level or not new, new specific increase, so we think that we are more or less at a, it's more behind us than in front of us, so we don't assume a huge inflation in terms of material price. Obviously, we can have crisis like we had with Nexperia in 2025. We have been able to basically have new sources for products that were delivered by Nexperia. We have alternative sources, so we are not expecting to be so much impacted by this type of crisis, and especially with Nexperia products in 2026, thanks to this dual sourcing. We think that the situation is stabilizing a little bit with Nexperia.
This is what, what we are assuming. No major impact is expecting on the inflation in 2026, to summarize.
Clear. Thank you very much. I have a last one, if I can squeeze it in. Is there already a comment on the dividend you may propose for 2025, or do we have to wait a bit for that?
Yeah, I think that that is too early. You have to wait for the, the final call when we announce then as well dividend. That's too early today.
Thank you, Peter.
You're welcome.
Thank you. If you would like to ask a question, please press nine and the star key on your telephone keypad. There are no further questions at the moment.
Okay. I would like to thank everybody for participating in the call. Thank you for the questions, and wishing you all the best. Talk to you soon, latest with announcement of the final results. Thank you very much. All the best. Bye-bye.
Thank you.