Hello, ladies and gentlemen, welcome to the HELLA Investor Update Call regarding the results of the fiscal year 2022. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. This call will be hosted by Michel Favre, the CEO of HELLA, and Bernard Schäferbarthold, the CFO. Let me now turn the floor over to your hosts. Please go ahead.
Thank you very much. Good morning, ladies and gentlemen. I have to mention that Kerstin Dodel is our IR as well, of course, present in this call. I will comment on the stat shows that you can find on the Internet. You know our figures, we will go with Bernard much more into the detail. Page four, I would like to remind you, the key, I will say messages. Firstly, we speak of a short fiscal year. As you know, we are aligning our exercise with Faurecia. That means that from first of January, we speak of calendar year. In this presentation, FY means fiscal year, seven months, 1st of June until end of December.
What is important to notice, whatever the fact that the reference was low, it is the acceleration of the growth, with 25%, I will say growth, mainly focused in Asia and North America. We have, I will say, high demand, and this is reflected by our order intake in our three core businesses, Electronics of course, Lighting as well, and more and more Lifecycle Solutions. Margin-wise, for the EUR 22 million for seven months, 5% margin. I will say 5% margin, of course, is not our target, but we are at our budget in this period, and I think it can be compared positively with our peers, which is quite important. We are accelerating synergy, and we will come back on that, and we are back to cash flow, which is, I think, a basic thing for SC company like HELLA.
Page five, this is to show you the dynamism of our, of this company thanks to the technology. We are today on the rhythm of EUR 1 billion order intake per month. Confirmed every month in our three activities. Lighting, firstly differentiation. Differentiation through the Front Phygital Shields and other we develop . Here we are clearly giving the opportunity to customers to create a signature. On this differentiation, the FlatLight technology is giving, I will say, a luxury touch onto the cars and more and more adapted by the luxury car makers. It is mainly rear combination now. Last but not least, because we have already started, we have probably a very competitive technology on the SSL HD high definition.
We are clearly a company which is offering very good products and solutions to medium to high range cars, of course, to the luxury cars as well. On Electronics, very successful year on the order intake. On the high-voltage converter, as you know that it is strategic for the energy management for the electric vehicles. We have some unique position on radar. The 77 GHz is very promising. Last but not least, the new technology for the Smart Car Access. I take advantage of Olivier's mention to remind you that our booth was a big success in Las Vegas. Please don't hesitate to visit us next month. We'll be with Bernard anyway in Shanghai, where we have a booth with Faurecia in the Shanghai Motor Show. Last but not least, Lifecycle Solutions.
We have a very smart proposal for truck internal lighting, and we are starting Intelligent Battery Sensor for, I will say, trucks. This could be a very promising business for the Special Applications activity. Page six. It is to remind you that we continue to optimize our balance sheet. We have sold HBPO. This is done, completed, and we are proposing to pay a dividend. For, I will say in order that our shareholder will take advantage of this optimization. On the footprint, we have opened a new plant in China. If I project in the future, we'll probably need one plant in Mexico and one plant in China to fit the growth. I remind you that this year we will overtake EUR 8 billion. 2025 will be around EUR 10 billion. Clearly, growth is accelerating.
Cooperation with Faurecia, which is key because we are inside a new group. Our people want to participate into the Faurecia story. Of course, we remain independent, but we have a lot of, I will say, opportunities to develop synergies. As you know, we have upgraded our expectations to more than EUR 400 million. The reservoir potential is much more, but we have to be dependable on our capacity to execute by the end of 2025. I can tell you we will do this amount, and HELLA will capture all of it. Revenue synergy, we leverage our different positions. I will say according to the customership of each company. We have as well some internal electronic supply that we can develop for Faurecia. We have everything to accelerate our growth as well. The last but not least, cash management.
A company which is not generating cash is not a healthy company. HELLA is generating cash and HELLA will continue to generate and to improve its cash management. It is a good way to give the floor to Bernard, because Bernard is our specialist on this side.
Thank you, Michel. Good morning also from my side to all of you. I would continue on page eight. First of all, we confirm all numbers that we also already published on preliminary basis. We have here in this presentation, the comparison also to the seven-month prior period, no? Just as a comment, these are pro forma numbers which are not audited, but should help you to better understand really the developments. On top of that, if you need the comparables also to 2022 in comparison to 2023, Kerstin is also happy to send you the files if she has not sent it already to you, just as an information.
If we look at sales first, from page eight, we had a quite a significant growth of overall 25% in comparison to prior years, EUR 4.4 billion. The organic growth was at 21%, we had the currency effect of around EUR 150 million, which represents around 4%, which comes mainly out of the U.S. dollar and renminbi. We had quite a significant growth in Electronics and Lighting, but also a solid development in Lifecycle Solutions. Positively, we benefited in terms of growth also with the increases in prices to compensate the inflation towards our customers. If you look at page nine, the different segments. Starting with Electronics.
Electronics is at on the seven-month period on EUR 1.7 billion in comparison to EUR 1.4 billion in prior year. That is an organic growth of 24.5%. It's in comparison to the volumes, solid outperformance of around 10%. We benefited especially of strong growth within our product portfolio of energy management, but also our radar projects, and specifically in NSA and in China, we had quite a significant growth. EBIT is at EUR 124 million, 6.5%, an improvement in comparison to prior year, but still with impacts out of the inflation, positively the pass-throughs of the inflation.
The compensation increased or the ratio increased, but still there is a negative effect out of that, and also the bottleneck situation from the same is impacted also our operations. A first good step again in terms of improvement in profitability, and as we stated also in the last Capital Markets Day, we are quite optimistic that continuously we can now improve the margin in Electronics back to the level we had before, which is significantly higher. We had quite a big increase also in R&D, proportionally because of our good growth performance. Relatively, the R&D ratio went down. We continue to invest with the very strong order intake we have done in Electronics.
Again, we had records order intake, also in the last seven months. Lighting also with a similar growth pattern, 23% of organic growth. Also a solid outperformance to the market, with ramp-ups, with a lot of projects, specifically also China, but also Mexico, and also especially with a lot of electrified cars. We benefited a lot from that. Here also an increase in the pass-throughs of the inflation. Still a level EBIT-wise, where we are not absolutely satisfied, as we also commented in the Capital Markets Day. We will do better in the future.
A first good step in terms of improvement in profitability we have done in a challenging market environment. We are also quite optimistic in terms of now this year and the further development of our Lighting business. If we look at Lifecycle Solutions. A solid organic growth of 5.3%. In terms of the business, we are growing globally in our spare parts business. Our SOE business was on a good growth level, especially on the agriculture customer segment, but also construction. Truck is and trailer is also growing, which the segment which was a little weaker was on the workshop products.
In the last year, we had quite a high level in the prior year with the launch of our new core product, the diagnostic tool, mega macs. Also here we see going forward the workshop product with some new product launches this year, will show again a more significant growth. That also together with a good further development of the spare part business and continuous solid SOE business, we believe that we can continue a good growth path also here in 2023. EBIT-wise, we are a little down in comparison to prior year, but this comes also with investments we are doing.
We are investing in our global sales network in terms for our aftermarket business, which should improve our growth path in the upcoming periods. We are investing in our workshop products and also on Special Applications, specifically, in our enhancement of our product portfolio, and here, the electronic applications, where we should benefit from also in the upcoming periods. Still a solid EBIT ratio of 10.1%. If we go to the next page, number 11, the regional split. We continue to accelerate our globalization. We are now around 50%, close to 50% now in Europe, 53%, exactly. We have grown our share in Asia-Pacific, specifically in China and also in NSA.
A very solid growth in NSA and in Asia, in the last seven months. Also, quite growth, high growth also in Europe, but by far, if we compare it with volumes in prior year, not as significant as in the other regions. We continue to see a very solid performance, also in the regions of NSA and Asia-Pacific now in 2023. Europe certainly is the biggest risk in terms of volumes also going forward. Overall, we are quite happy about the outperformance also in all three regions, we have. We are quietly, from our perspective, very good, balanced. If we look at the full P&L on the next page, 12.
An overall EBIT of EUR 222 million, 5% of sales. We see on the positive notes that our R&D ratio is decreasing. Our SG&A ratio is also decreasing. This is what we also already commented in the Capital Markets Day, that step by step, we want to come back to the R&D ratio, which is below 10% and more coming towards 9%. That also in terms of SG&A, step-by-step, we also want to reduce by around 1 percentage point. Here, first step is now done. In terms of gross profits, we are still not there. We are 1 percentage point down due to the inflation.
We increase the inflation over the pass-through. Still not all has been recovered. We still have to continue to work on it. We think that we should improve now also in 2023, a first step in terms of gross profit to recover and come step by step back to levels we had before. We envisage to come in the next years back to a level which is around 24%-25%. In terms of reported EBIT, we are at EUR 383 million. We have a positive adjustment number of EUR 161 million overall. We have the profit out of the sale of the HBPO share, which makes EUR 250 million overall.
We have a negative effect out of some restructuring measures, some provisions we have taken and also specifically provisions for delivery obligations we have taken specifically on programs in Europe of overall -EUR 51 million net. This makes then positive adjustment result of EUR 161 million, which adds to our adjusted EBIT. If we go to page 13, our free cash flow is at EUR 83 million adjusted. This is without considering any effect of factoring. We had quite a strong end to the year with a reduction of working capital, despite the fact that our net CapEx has increased the year-end at EUR 392 million of CapEx.
This comes with the strong and high investments we are doing related to the very high order intakes we had above EUR 10 million in the two precedent years. Having said that, I hand back to Michel with the outlook, and I'm happy to take the questions afterwards.
Thank you, Bernard. You see the page 15. You see that we are, on this page, more conservative than AFS. AFS, month after month is confirming 85 million vehicles production, which is still far away from the pre-crisis level. As you know, we are facing some unbelievable, I would say, impacts, starting with inflation. Cars, probably, car prices have increased by more than 20% between 2019 and this year. 20%. That means that a car is less and less affordable, and this could play, could have a weight, on the future volumes. It is something that anyway, as HELLA, we are taking into account in our plan, and we have always been more conservative, and mainly more conservative in Europe.
It is why, like for the year, we take 82.4 million vehicles, which is a figure that we can confirm for the first quarter. We have AFS is forecasting an acceleration for the rest of the year, with the only caution I can tell you is that our programs are not bad. Saying that, it is page 15, it is a guidance. We forecast sales between EUR 8 billion-EUR 8.5 billion, which will be the first time for HELLA to be above EUR 8 billion of sales. We were, if I take the rhythm of the second of the last, I will take the slide. We are more or less at EUR 7.6 billion, EUR 7.7 billion. We are already very close to this level.
I can tell you that you will see the figures for the first quarter. We are totally in line with this guidance. Operating margin, we confirm the 5.5%-7% range. Of course, we have seasonality. The first quarter traditionally is lower than the rest of the year, due to vacation in the first week of January, mainly in Europe, for the German car makers and Spanish car makers. The more important is the famous Chinese New Year, which was mainly January, a little February. You will see something that our figures that we will disclose, will be in line, with the guidance. Of course, seasonality will be more in the low range of the operating margin, but I can say with Bernard that we are just starting from that.
Net cash flow, 2% of sales will continue to improve. First quarter will be under pressure due to the Chinese New Year again with the terms. Anyway, we will be back to cash generation from second quarter onwards. What I can say on 2023, of course, it is definitely to improve the performance that synergies will help. We speak of, when you see the figures of more than one point of improvement of profitability and a significant improvement on the cash flow. We have as well to continue to pass-through inflation to customers. We have made our homework last year. We are probably 75%-85% pass-through, and we will continue to make the deal with our customers, which is a win-win story. We have the synergies.
Synergies, we have given the figure for 2025. We have achieved something like EUR 30 million in the last year, and we want, again, we don't wanna not to be weird, give the figure, but probably to be close to the double for this year. As a P&L impact. Of course, we continue to improve our footprint, our portfolio management. Saying all of this, we can go now to questions. Please, operator, start this Q&A session.
Thank you very much. Ladies and gentlemen, if you would like to ask a question, please press nine and the star key on your telephone keypad. In case you wish to cancel your question, press nine and the star key again. We would like to ask you to limit your questions to three at a time. Thank you very much.
The first question comes from Akshat Kacker. Please go ahead.
Morning, Michel. Morning, Bernard. Akshat from JP Morgan. Three questions, please. The first one on China, could you please talk about the current market environment, inventories, production trends in the coming months as we are now seeing OEMs reducing shifts, cutting down capacity, and also increasing incentives in the market. How do you just generally expect the year to pan out with the upcoming change in emission standards, please? That's the first one on China. The second one on Lighting. The business is obviously seeing very strong growth. Could you remind us about the measures that you're taking to improve the profitability of the business, if you are already going to see meaningful improvement in the first half of this year versus what we saw in the second half of last year?
Finally, on the current trading, you're almost at the end of Q1 of your new calendar year. Is it possible to share some more details on the revenue trends in the first three months, margins or... I know you've already detailed out cash flow trends, but revenues and margins, please. Thank you.
Thank you. Good morning. I will take the two first one, Bernard will take the last one. Current trading in China. First thing, which is good, inventories are not very high, which is, this is always a good thing for our sector. Demand, we need to understand better the demand, huh? We must not forget that there was a COVID time, December, January, the new Chinese New Year. Here on the demand, it could be a little weak, which means that more or less the same as last year, not showing a growth. Some people and our people consider that it will accelerate. We have in China a quick switch to EV, huh? It is why the Chinese, I will say, car makers are gaining market share, huh.
I would say, probably they will not only gain market share in China, huh, but they will be more and more present in Europe. This could play as well for the production. You can see probably that now I think China is exporting something like 1.5 million cars. It is a big change respect to three years ago. Today we see good volumes in China. We want, of course, to have better safety. We will be in the Auto Shanghai. It will be a very good opportunity to share with customers, et cetera, what are their actual focus and understanding of the market. Lighting. Lighting was damaged, huh, in the first half of 2022 by the fact that we are late to pass-through, huh? We have recovered.
We have definitely improved operations with some change of management in North America, huh? We are improving in Europe. We are today implementing an initial plan which is mainly to specialize the plant, the type of activity, exams, which is, which is random, et cetera, which is front modules, which is rear combination now and which is internal lighting. This start to produce its effect because when you massify, when you specialize, I will say plants, you are always more efficient. Our expectation is that of course the profitability will see a further improvement in the first half. It will continue to improve in the second half. We are in sequence.
I remind you that in the Capital Markets Day, we're speaking of a profitability of 6%, which is a real breakthrough if you remember the minus something of the first half 2022. The team, and I want to thank the Lighting team, is making the work.
In terms of current trading, we said, January and February were a little slow, no. March was quite good, no. Also in terms of numbers of working days, no. It for that reason also the sales was quite solid and the demand increased significantly. Overall, it will be the weakest quarter in terms of if we look at the full year, no, from our expectations, no. In comparison to prior year, it's still quite a solid growth, no. But also taking into account that last year the comparable last year was very weak, no. We are growing, but it remains in terms of our full year guidance the weakest quarter.
For that reason, no, as we also said, we expect that in terms of profitability, it will be at the lower end of our range for the full year, no, the first quarter. The low range or the low is at 5.5%.
Great. Thank you so much.
The next question comes from Christoph Laskawi. Please go ahead.
Good morning, Christoph Laskawi from Deutsche. Thank you for taking my questions. The first one will be on the health of the supply chain. When we are speaking with the OEMs, it seems like they are commenting that semis is no longer a problem. Do you see the same also for you? Do you get what you order or even a bit more than that? Is the availability improving? Also it seems that especially the European OEMs trying to work through their backlog in Europe. Now as the semis seem to be better available, do you see a fairly rapid uptake of the production run rates at the customers in Europe or is it so far not visible? Then just on also somewhat related, do you still have stop-and-go production in your footprint?
In case not, it's working more smoothly, how much could that really help on the margin side already in H1, by just eliminating the stop-and-go? Thank you.
Thank you. Good morning. About the comments from the car makers. Yes, we see an improvement on the semiconductors, but it is still a little erratic because you speak of stop-and-go, and somewhere you are aware that there are still some stop-and-go. If the world was so perfect, there will be no stop-and-go, which means that our car makers will stop over, I will say, planning and production. Because it is still the case, and we are still in our projection to cut by 50%-20% the program, the call-offs, 50% by customers. We are in a world which is normalizing, but still with some topics. If you have some standard of semiconductors, we are still seeing some small crisis and some small tensions. That is not, I will say, helping our life.
I will say for the moment, we have still some difficulties to reduce inventories. This is an indirect, I will say, answer to your question. For the waiting time, some improvement, but not as much as you were expecting, because there are still probably some models, huh, with a very low waiting time, which is not good. The catch up should happen, should really happen this year, but it's not yet visible.
That's clear. Thank you.
Okay, we don't have another question at the moment. If you would like to state another question, please press nine and the star key on the telephone again. We have another question. It comes from Philipp Koenig. Please go ahead.
Thank you. Thank you for taking my question. I just want to come back on the point you were making on the rise of the market share of the Chinese car makers. Can you just sort of share how it compares between your relationship, you know, the JVs in the market and you have with the Chinese car makers? Are the contracts any different that you have with them? Are the negotiations any different, or is it actually very similar type of business in terms of how you structure their relationship, the pricing, and also the content on the vehicles? Thank you very much.
The way of working together with the joint venture partners is quite similar to if we work directly with the Chinese OEMs. Also, let's say the pricing is very similar. No? Normally, basically our partner has the customer access. No? What we basically add then also, let's say as a pricing component to it. No? Is specifically also our technology and basically the development we are doing on top of that. The comment we are making overall is that we see that this new or established Chinese car players also what we are seeing will continue to gain market share. It is for us also very important to further also grow with these players.
That is something also what we commented before, where, we are doing business, with the most important, ones, which are also growing significantly. They will get more important also for us. The game rules are basically the same.
Thanks. Maybe just a follow-up on that. In terms of the supplier, the other suppliers that you would be competing with there, is that also the same landscape or given that, you know, a lot of Chinese OEMs probably have a fairly localized supply base until now, and sort of now they want to grow and they're looking to probably to further work with global suppliers. Is it sort of a different competitive landscape, or is it sort of you're seeing yourselves competing with the same, you know, other companies as in, as in Europe and in North America?
You have some Chinese suppliers, mainly for the low range of the market. We have one which is clearly developing, which is very well known, Yanfeng, but we don't, of course, which is a very valid, I would say, competitor, more in our type of business. Of course, the European ones, Japanese ones are present in China with their traditional customers. For Electronics, we see a world where we have a very large room of maneuver, and that with the development of electrical makers, we should continue to be very successful in those areas.
Thank you.
Okay, we didn't receive any further questions. I will leave the line open for a couple more seconds. Nine star for your question.
If no more questions, firstly, I would like to thank you for your attendance. Second, our next rendezvous are the 27th of April for the first quarter results and the 28th of April for our shareholder meeting. Thank you and have a very good day.
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