Good morning, everyone. Welcome to our press call on the half-year figures of Porsche AG. This is Sebastian, and with me are Oliver and Lutz. Already mentioned, glad to have you here, and glad to have you all on the call. Today, we would like to give you a brief insight to our business performance so far this year. Oli will start with a quick look at the most recent developments, challenges that we are currently facing. Afterwards, Lutz will explain our figures for the first half year to you in detail, and he will also give you an outlook for the second half of the year. After that, we will be happy to take any questions, and with this introduction, the floor is yours, Oliver.
Thank you very much, Sebastian. Good morning. Welcome everyone, also from my side. Thank you for being with us today. As you all know, we are celebrating 75 years of Porsche sports cars this year. We continue to inspire our customers, not only with the current product lineup, but also with exciting new additions. Past quarter saw the launch of the new Cayenne. Furthermore, we successfully held our first Annual General Meeting since the IPO only a few weeks ago. The global economic situation remains challenging, with an impact on us, too, of course. We can also say we are showing a very solid performance under these difficult and challenging conditions. Financial results turned out accordingly. Group revenue in the first half year was EUR 20.4 billion. This is an increase of 14% compared to the previous year.
Group operating profit was EUR 3.9 billion. This is an increase of 11%, reflecting higher group sales with a stable price penetration, but also the challenges from the supply chain. Group operating return on sales in the first half of this year was 18.9% and 19.5% in the second quarter. Lutz will give you more details on the financials later. Given the economic situation and the ongoing supply chain challenges, these are strong results that give us strong foundation for the full year. We are therefore confirming our full- year 2023 outlook statements. At the same time, we're expecting the macroeconomic and supply chain challenges to persist in the second half of the year.
Our deliveries on customers, the first six months of 2023, were up by 15% compared to the previous year, despite model cycle changes and ongoing supply restrictions. This is a very pleasing result so far. We posted gains in every sales region, which is proof that our products are in high demand around the world. We are benefiting from a well-balanced share between the regions: 95% in North America, 32% in Europe, 26% in China, and 17% in overseas. The launch of the new Cayenne has been very satisfying so far. We have posted over 30,000 orders since its presentation in April, even though the car has not even reached the showrooms of our worldwide Porsche centers yet. The order mix demonstrates that our customers are making good use of the opportunity to individualize their vehicles.
Deliveries to customers have started in several markets. Introduction to China is planned for September. We are benefiting from a recovery of the supply chain for commodities, chips, and commodity parts. Major challenges remain in terms of availability and price inflation for many of the components that are differentiating our product, and parts that are in high demand from our customers. Therefore, we still have to be very flexible in our day-to-day business and production planning. This is reflected accordingly in waiting times, unit sales, and costs, and we expect these challenges to persist in the future. Once again, to be clear, it's about the special parts that are differentiating our product, not the commodity side of the supply chain.
Regardless of these challenges, we keep investing extensively in our development, in innovations, and in our Porsche ecosystems, so that we can continue to offer our customers the products and services they expect from us. We have taken the next step on the way to tailor-made, high-performance battery cells. Since May, we have been the sole shareholder of Cellforce Group. The aim is to scale up the cell manufacturing process in the medium term, if necessary, also at other locations, and we are prepared for the entry of new investors. Let me summarize. The situation is challenging, but we have a clear plan for the future of Porsche, and we keep putting it into action consistently. For further details, I now hand over to Lutz Meschke.
Yeah, thank you, Oli. Good morning and welcome also from my side, everyone. In the next couple of minutes, I will share the major milestones we've achieved in the first half of 2023 with you. Overall demand for personalized, well-equipped Porsche cars remain satisfying and cancellations are low. This is reflected in the number and the mix of incoming customer orders in the first half of the year. Unchanged, the 911 has the largest order book, strong mix, and longest waiting time, around a year, the average across all derivatives. The first two quarters of 2023, we posted very satisfying wholesales and deliveries to customers. This success is a great team accomplishment of procurement, production, and sales. All of them are dealing with significant challenges on a continuous basis. Deliveries to customers increased by 15%.
Germany, Europe, as well as the area overseas and emerging markets, are growing over proportionally, making our regional mix more balanced. The sales increase was led by all product lines, but Taycan, where we continuously face significant supply disruptions. The BEV share was 10.8% in the first half year. From now on, we expect Taycan sales to benefit from improving parts availability and higher supply. Achieving our BEV target of more than 12% for 2023 will be challenging. The first half of 2023, at a group level, we achieved a revenue of EUR 20.4 billion. This represents an increase of 14% compared to the same period last year, and is mainly due to higher group sales with a stable price penetration.
The group operating profit increased by EUR 372 million to EUR 3.9 billion in the first half of 2023. This translated into an operating return on sales of 18.9%. The first half, we had to digest higher costs compared to last year, resulting from an inflationary environment, as well as intensified sales activities, digitalization, and increased motorsport engagement. The earnings per preferred share amounted to EUR 3.04. At EUR 3.7 billion, the automotive segment's operating profit in the first half of 2023 exceeded the prior year figure by EUR 392 million. This accomplishment was a result of higher sales with stable pricing and continued beneficial product mix, slightly upset by higher costs, as well as spending and investments into our product and innovation portfolio.
With automotive sales revenue of EUR 18.9 billion, the operating return on sales for automotive was 19.3%. Automotive EBITDA rose by EUR 480 million to EUR 4.8 billion, corresponding to an automotive EBITDA margin of 25.6%. The first six months, we were able to produce more vehicles than in the same period of last year. In this context, let me comment on our balance sheet and the increase in inventories and finished cars. At Porsche, this is a normal course of business as our production shuts down for the summer holidays. The vehicles and transfer of the new Cayenne to our dealers also had an impact.
Despite our high level of investment activity into product, innovation, plants, and our ecosystem, we achieved a net cash flow in our automotive business of EUR 2.2 billion in the first half of 2023. Net cash flow margin for automotive was 11.7%. Please note that we also had seasonally higher cash outflows in the second quarter for bonus payments and a pro rata delayed tax payment, in addition to the increased inventory and investments. Revenue from the financial services segment increased to EUR 1.7 billion. The operating profit in the financial services segment amounted to EUR 174 million in the first half of 2023. The result was impacted by a valuation of interest rate hedges and derivatives outside of hedge accounting. This is a part of regular refinancing activities.
Our financial services penetration in the first six months was 40.8%, which was more than 200 basis points lower than at the end of 2022. This development reflects that we pass on the market terms in our offers. As of June 30, our automotive net liq uidity decreased by EUR 1.9 billion to EUR 6.4 billion compared to the end of the fiscal year. This is a result of the positive contribution of net cash flow, and on the other hand, of the cash outflow of the last payment in context of the profit and loss agreement and domination agreement with VW, which were terminated in the meantime. Investing in product innovation to better serve our customers is one of our key priorities.
As in the first half of 2023, we spent EUR 1.5 billion on R&D, 18% more compared to last year. Most R&D expenses in the reporting period were due to the conversion of the product range towards electro mobility. The R&D ratio was 8.2%. Own work capitalized amounted to EUR 1.2 billion in the first six months of 2023. The increase is due to the rising expenditure for ongoing projects, which are close to being ready for series production. Depreciation and amortization of capitalized development costs amounted to EUR 427 million. Let's move on to the outlook for 2023. Porsche AG Group continues to be confronted with a challenging macroeconomic environment. Challenges in securing supply chains and parts supply, as well as generally rising cost levels and various geopolitical tensions.
At the same time, the Porsche AG Group is investing extensively in its development, innovations, and the entire Porsche ecosystem for future products and services. Despite a challenging overall global situation, the Porsche AG Group confirms its forecast for the full year 2023, published in the Combined Management Report, also regarding the conditions, provided that the global and supply situation does not deteriorate significantly. Based on these above-mentioned assumptions, the Porsche AG Group expects an operating return on sales for 2023 in the range of 17%-19%. This forecast includes assumed group sales revenues in the corridor of around EUR 40 billion-EUR 42 billion. Our forecast for the automotive segment is a net cash flow margin between 10%-12%, and an automotive EBITDA margin between 25%-27%.
As part of the 2023 sales forecast, the company expects fully electrified vehicles to account for up to 12%-14% of total new vehicles delivered to customers. However, this target requires a far better supply situation for Taycan in the second half of 2023. Thank you very much for your attention. We are very much looking forward to answering your questions now.
Ladies and gentlemen, at this time, we will begin the question and answer session for media. Anyone who wishes to ask a question may press star followed by one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you are using speaker equipment today, please lift the handset before making your selection. Anyone with a question may press star and one at this time.
Okay, ladies and gentlemen, we have now about 30 minutes. We'll start right away into the questions. We start with FAZ, Christian Müßgens, please.
Yeah, good morning. I hope you can hear me. Hello?
Hi, good morning. Hi.
Good morning. I have two questions. You talked a lot about the macroeconomic environment, and the question is, if we've seen quite some effects in the volume segment of the Volkswagen Group, do you see orders go down in the Porsche business, too? Or do you see effects on your order income from the economics, from the economic situation? The second is, you have ongoing problems with differentiating parts in the supply chain. Could you please give some examples? What were those differentiating parts that you are that you don't have enough from? I guess it's mainly about the Taycan.
Okay, Christian Müßgens, may I start with a macroeconomic situation, and that's a bit different in between the regions. In short term, especially in Europe, we see a slowdown growth dynamic, and when we look to China is still very volatile, and the recovering of the market isn't still there as expected. We are balancing within our regions, and the positive aspect for Porsche is that our business is based on four pillars: North America, Europe, China, and overseas. We were able to develop our market regions during the last 10 years to strengthen China and overseas, and this gives us a well-balanced situation.
To your second question, it's about differentiating parts, especially when it comes to the Taycan. We have, for example, the high-voltage heater is one of these components, but also when it comes to very special items from small suppliers, there we come to a limit because of the high demand of our specialized licensed cars. There are several parts of this, no? Main important for us, especially in the ramp-up of electrification, is a high-voltage heater.
Okay, we go to Reuters, Victoria Waldersee, please.
Sorry,
Yeah, now we can hear you.
Sorry. I was just saying, could you expand on your plans for Cellforce? You said you were looking for new investors. What kind of investors are you looking for, and what kind of timeline are you expecting there? Is it correct that you took over as sole shareholder in mid-May? Thank you.
Yes, thank you for this question, Ms. Waldersee. We have a clear plan for the Cellforce Group in the upcoming years. We want to accelerate towards a real giga factory. We plan a capacity for 10 - 20 GW in the upcoming years. Therefore, we are looking for strategic and finance investors in order to support our strategy in this direction. We have to take into account that a 20 GW factory will require an investment between EUR 2 billion and EUR 3 billion. Therefore, it's necessary to have strong partners on board. We are in very good and promising talks with finance and strategic investors with regard to this development.
We are quite confident that we can give you further details at the end of this year.
Adding, for example, to the location criteria, when we will go there, it will be very important for us, for example, the energy pricing. Now, currently, we have very positive experiences from North America, and it will be important. We are sticking to Germany very clearly. Most of our cars are produced in Germany. Most of our people working work in Germany, and we invested for our 1.3 GWh factory in Baden-Württemberg. For location, it is important to have a positive calculation for our factory. Energy costs play a role in North America.
We see good efforts with tax credits, for example, low bureaucracy in the decision processes. That will be important for our decision process where we will locate it in future, this factory. It isn't decided yet, but it's a competition in between the different locations.
We will have a beauty contest between the European countries and the U.S. and maybe also Canada. At the end, it's very important to get very promising energy costs guaranteed. A difference of EUR 0.01 energy cost makes a difference in cost by EUR 100 million per year, and that's a very important argument for the location decision.
Now we go to dpa-AFX, Marco Engemann. Marco, please.
Yes, good morning. Thank you very much for taking my question. In regards, a possible guidance upgrade for the margin. As I understand, there are price increases that will really kick in in the second half of the year, and in the first six months, you already have been at the upper end of the margin guidance. Will cost increases erase the effect from the higher prices in the second half? What's stopping you from upgrading the guidance? Thanks.
Yeah. Yeah, a very challenging macroeconomic environment. You mentioned it, first of all. In China, the market is quite weak at this point in time. We have inflationary impacts through the entire range of raw materials, components, and so on. We see cost increases regarding wages. We will have the new labor tariff in place in Germany starting in June with an effect of 5.3%. Of course, we still have supply issues. We have already mentioned the problems in the supply chain, for instance, with the high-voltage heater for the Taycan.
Of course, we have to invest heavily in new models, in our development and on our innovation process and in our entire ecosystem also around the car. Therefore, we have to be careful with an adaptation of our targets. Therefore, we feel quite confident with our corridor of 17%-19% also for the entire year, 2023.
Now we go to Bloomberg, Monica Raymunt. Monica, the floor is yours.
Yes, thank you so much. I was wondering if you could provide a little more insight, first of all, on the supply chain issues, not just specifically on the Taycan, but also more broadly. The bigger question, sort of more broadly on the macroeconomic situation in Germany, if you could offer your insights into how you see the current economic climate, specifically in Germany. Thank you.
May I start, Monica, with the supply chain situation? As you know, we struggled heavily with the supply of semis during the last years. There we have a more stable situation right now. We see still a lot of uncertainties also because of geopolitical crisis or economic crisis around the world. There's no week where we haven't no supply chain issue, and therefore, we have to be very flexible in terms of production planning. I think we will see this situation also in the future. Therefore, we have a very close contact to our partners, but we have to be aware.
especially as we mentioned before, in differentiating parts, where we have, generally, smaller partners or suppliers, and on the other side, having a high demand. That's positive for Porsche, that our customers going more and more to individualization, what brings us to a better profit margins. On the other side, there we talk about thousands or millions different parts we have to steer, and therefore, we need a high flexibility. Coming to the second part of your question, in terms of the German market.
We have had a very strong growth in Germany in terms of sales, but we are expecting slowdown in the market. We already can mention it in the volume segment, or for example, we are convinced that the luxury market are less affected and more resilient against these economic downturns in general. We have to watch it deeply, how the market will develop. There are inflation effects. So we are still in a very strong situation, especially while we are positioned in the luxury market, but we have to be aware.
Thank you.
We still have a very high order intake, across all model lines in Germany, and therefore, we are very confident to reach our targets, in Germany for the entire year, 2023.
Now we go to Die Zeit, Max Hägler, not for Süddeutsche anymore, but still in the game. Hi, Max, the floor is yours.
Hey, Sebastian, thanks for taking my questions. Good morning, from Hamburg now. What could you say regarding the margin of BEV vehicles, especially the Taycan, compared to your traditional ICE cars, the ongoing question since years, and what's the update? The second question is, we have an ongoing discussion in Germany, especially in Germany, about how to stimulate the demand of BEVs. As you mentioned, the demand is in plan, but you have to be aware. Is there anything you suggest we would say, how Germany, how the European Union could stimulate the market, the whole market at all? A third short question.
Lutz, you mentioned the effects of a new labor regulation starting in June, had some effects to Porsche. I didn't get this point properly. Please, could you repeat? Thanks.
Yeah. Let me start with your first question regarding the margin of the Taycan compared to our combustion engine cars. As I've already mentioned in our last call, we still have a gap between combustion engine cars and the Taycan, we expect to close the gap with our upcoming platform synergies. I have already mentioned that we rely in future when it comes to BEV transition, just on two platforms, one for the two-door cars, starting with the new E, 718, then later on, followed by the 911. The other platform will be for all the four-door cars, starting with the K1 and then also used by Cayenne, Panamera, and also Taycan.
That will help a lot to generate synergies within the Porsche Group, and we can also benefit from synergies with the VW brands. That gives us huge potential in future to close the gap between combustion engine cars and the BEV cars. We have, yeah, a certain proof of concept in place with the Taycan, that our customers accept an even higher price premium for the BEV cars compared to the combustion engine cars. It gives us the confidence that we will have a good approach also for the further transition towards electromobility.
Yeah, Max, maybe, I will come to the second part of your question about stimulation of the BEV market, and let me approach from two sides. First of all, there are three criteria important for a strong BEV ramp-up. The first is the right product. It's our responsibility to excite our customers, and there we have a very good feeling at Porsche with a very successful Taycan. Now, with the upcoming Macan, then the fully electric 718, a Cayenne, which is planned, and a luxurious SUV in the upcoming years. The charging infrastructure, and let's say a shared responsibility in between the automotive industry-...
energy suppliers, for example, the mineral industry, but also the communities, to invest and build the charging infrastructure, especially in towns and cities. There, I think we have to speed up heavily. We can see the positive example in China, where they invested during the last years very heavily, and that you can mention in as a strong F demand in the market. Last year, 25% of new sales, this year already, one third. Certainly, renewable energy. The electrification only makes sense when you have the right energy mix. There, I think, we still have to invest heavily, especially in Germany and Europe.
Second part is to support industrial investments in Germany, for example. With Swiss models, like tax credits. We talked before about energy pricing and also the processes releasing projects. The support can come from different sides. From our side, important is charging infrastructure and supporting industrial investments.
We have-
Yeah, maybe one-.
I'm sorry.
An additional comment regarding stimulus from the political side. I think it's absolutely necessary. If Germany wants to have a climate change, a clear climate change, then it's necessary to change also the subsidy politics. We have to cut the subsidies for diesel, and we have to count on the electrified business. That means we need to have a stimulus regarding the acquisition of BEV, and we have to support also green energy solutions. That means also our activities regarding eFuels should be supported by a clear political support. This is necessary. We have to mention it very often, otherwise it will not work. We still rely on subsidies for, yeah, the old combustion engine cars, and it doesn't make sense.
If you want to have a change towards electrification, then you need also to change your politics regarding subsidies. It's not only an issue for Germany, but especially in Germany, we have to address it heavily. Your third question regarding the labor tariff increase. We will see a labor tariff increase in June, or we have already seen it in June, started in June, by 5.2%. The unions agreed the employees' increase of 5.2% due to the inflationary environment, and we will see a further increase in the first half of 2024. The impact of the first increase is about EUR 100 million per year proportion.
I would close the list having three journalists, on the agenda. We start with Patricia Nilsson, then go to Lutz Meier, and, finally close with Michael Gerster. Patricia is right away.
Thank you. Good morning.
Patricia. Okay, then. Go ahead, please. I yield you time.
Thank you. Thank you. Good morning. Thanks for taking the questions. Two quick ones. One, again, on it being slightly difficult to reach BEV targets for this year. Can you give a little bit more detail as to what pertains to issues in the supply chain and lack of parts? What are you seeing in terms of demand for these vehicles? Is that also dropping? The second question is on your battery company. I am wondering, what is the future potential synergies between PowerCo and your own battery company? Are you not doubling up a little bit there? Thank you.
As you know, the Taycan is very successful in the market, and we are still in a strong demand. We are struggling still with supply chain issues, as I mentioned before. For example, the high-voltage heater. Our expectation is to be in between 12 and 13% F this year. Currently, we are in a situation of 11% F and 11% plug-in hybrids. In total, 22% electrified by us. For the next years, with a very strong product offensive, with Macan, 718, Cayenne, and the luxury SUV.
Our ramp-up curve is based on this product strategy, it will lead us to our expectation to sell over 80% BEVs by 2030. For the upcoming months, everything depends a bit on the supply chain, but we think that we can achieve at the end. This range we have announced in between 12% and 14% BEV.
Okay, and regarding the battery cell development and production, yeah, maybe I should take you a little bit in our strategy regarding battery cell development and production. We have a three-pillar strategy for Porsche. We will rely in future on suppliers like LG or also CATL, as we did in the past, and we have the possibility to work together with the Cellforce Group and the other joint venture partners of the VW. For our performance cells, we will rely on our own development and production within the Cellforce Group.
That means we will have a wide range of battery cell production within the Porsche Group, and we will have synergies between the Cellforce Group and PowerCo when it comes to raw material sourcing, and also when it comes to the knowhow regarding the industrialization. That means the entire factory process. It's very important to have a wide range of opportunities when it comes to battery cells, since due to the heavy ramp up towards electrification for all OEMs, we need to be very flexible in order to get the right capacity in place, and we need this capacity within Porsche.
Therefore, our clear strategy to rely on our external suppliers, to rely also on PowerCo, VW Group, and to have our own Cellforce battery cell development production within the Porsche-owned Cellforce Group.
In terms of raw material, we are benefiting from our industrial cooperation. We do have with Volkswagen Group when it comes, for example, to cobalt, lithium, and nickel. There you need a strong investment which we are able with the Volkswagen Group, and so we are sharing these raw materials together with them.
With this, the second last question goes to Lutz Meier, Capital. Lutz, please.
Hello, good morning, thank you also for taking my question. It's a more general one, if I may. I'd like to ask you to elaborate a little bit on the luxury strategy and also on its development. As far as I understood, maybe 10 years ago, you would have heavily refused to be called luxury and even more stated being performance or sports cars manufacturer. How was its development and how it's developing currently? Oliver just mentioned that the luxury market was less affected by economic slowdown than other markets, maybe you can also give a little outlook on what you expect from the luxury market and what does it mean for your product range and product in general. Thank you.
Yeah, Mr. Meier, first of all, we are positioned in a unique positioning in the worldwide automotive market. On the one hand side, the very high pricing level, like luxury niche manufacturers. On the other side, with scale effects in between our group by selling over 300,000 units or benefiting from the industrial cooperation from Volkswagen. That brings us in a very positive cost positioning, while we are able to get the pricing level as at others in the luxury segment.
On the other side, building our luxury strategy even more, is to build our customer touch points, especially in big cities of the world, where we have special concepts to get them, where we have also digital concepts. On the other side, what is very important, the level of individualization of our products, our special items, we are offering. There, we are expanding heavily, especially with our Exclusive Manufaktur. We do have into Porsche or a special program we call Sonderwunsch program, where we fulfill every dream of our customers, and that brings us in this unique positioning in the luxury segment.
It's a very important aspect, that luxury means not only having a luxurious product, it's also beyond the car. It's a customer experience beyond the car. We have to take with us, the customer, regarding their entire life journey. As Oliver mentioned, it's important to offer unique experiences around the car, special customer events when it comes to cultural or sportive activities, for instance. We have to offer, and we do offer, the activities across all our Porsche Experience Centers. That makes us unique. We are the only OEM which can offer this special experience, and it's also very important to offer digital products in the future, which delivers unique experiences. Also very important is the convenience regarding charging services.
Beyond our activities within IONITY, we decided to have our own fast-charging infrastructure, starting now in Germany with the first location. That will give us or will give our customers a completely luxurious experience also around the car. It's important not just to count on the car itself. We have to improve the awareness for our brands, that our brand stands for luxury activities in all different customer segments, and therefore, we have to invest heavily in this direction. You mentioned 10 years ago, Porsche internally at least was more a sports car manufactory, down manufacturer, but very down to earth.
Of course, our customers have seen Porsche always as a luxurious product, and it's more an internal issue to develop all these activities and skills in this direction, that we cover all the necessary segments in order to deliver the best experience for our customers, and that's the point. We are a luxury company, but it's not necessary to talk about this from our side. It's important that the customer has the perception that Porsche is luxury, and that's exactly the point. That's important.
The last question for this media call goes to Automobilwoche, Michael Gerster. Michael, please.
Yeah, good morning. I've got two questions concerning the electric Macan you're introducing next year. The first one is: Are you still on schedule, and how confident are you to have a stable and running software when the car will hit the markets next year?
The second one, it's the first model to really replace an ICE model, and there are more to come, so with BEV numbers slowing down, especially in Europe, and costs for batteries still remaining high, I mean, how long will the ICE Macan run alongside the BEV, and do you have plans to extend the life cycle of the ICE Macan beyond your initial plans if customer demand is still high for this version of the car?
Mr. Gerster, two quick answers. First of all, we confirm the market introduction next year, we are in the final testing phase. I'm very passionate being able to test the car, especially its driving abilities and the infotainment we will offer. We will bring the car to our customers when we are 100% clear that the car in terms of quality is perfect. In terms of overlapping in between ICE and BEV, we are calculating between 2-3 years, depends on the regions.
That's our strategy for the future, having this flexibility for all the other new fully electric cars, where we'll have a overlapping in between the existing ICE and the new BEV, because the different regions of the world are developing with a different speed, and therefore, we need this flexibility.
With this, I say thank you to Oliver and Lutz, and to all of you for asking your questions and the fruitful exchange. We will make a very short break and come back after you with my colleague, Björn Scheib, and then the investors call. Thanks. Take care. Bye-bye.
Thanks.
Ladies and gentlemen, thank you for standing by. Welcome, thank you for joining the analyst and investor call regarding the Porsche AG H1 2022 Results. This call will be hosted by Oliver Blume, chairman of the board, and Lutz Meschke, deputy chairman and member of the executive board for Finance and IT. All materials, such as the investor deck or interim report, are available in the investor section on the Porsche website. Before we begin, let me remind you that all forward-looking statements to be made during today's call are subject to the risk and uncertainty mentioned in the safe harbor statement, including the Porsche materials. This call will be governed in this language. During the intro statement, of the beginning of the call, all participants will be in listen-only mode. After the intro, we will jump to the question- and- answer session.
If you would like to ask a question, you may press star followed by one on your touch-tone telephone. Please press the star key followed by zero for operator assistance in case of any technical difficulties. Now, I would like to hand over to Björn Scheib, Head of Investor Relations. Please go ahead, sir.
Hi, good morning to all of you. We fully understand you all have a quite busy morning here in Europe with the reporting of a couple of other companies, including ours. From that point of view, we try to make this now to be as efficient as possible so that you have the chance also to join the other conference calls thereafter. I'm Björn, I'm the Head of Investor Relations here at Porsche, and I'm being accompanied by our CEO, Oliver, and our CFO, Lutz, who will be very happy to answer your questions thereafter. We will quickly start with an intro summarizing the operating performance this quarter to give you better insight. Last but not least, we will continue with the Q&A session that will follow. Oli, the floor is yours.
Yeah, thank you very much, Bj ö rn. Good morning, and welcome, everyone, also from my side. Thank you for being with us today. As you all know, we are celebrating 75 years of Porsche sports cars this year. We continue to inspire our customers, not only with the current product lineup, but also with exciting new additions. Past quarter saw the launch of the new Cayenne. Furthermore, we successfully held our first inaugural Annual General Meeting since the IPO only a few weeks ago. However, the global economic situation remains challenging, with an impact on us, too, of course. We can also say we are showing a very solid performance under these difficult and challenging conditions. Financial results turned out accordingly. Group revenue in the first half year was EUR 20.4 billion.
This is an increase of 14% compared to the previous year. Group operating profit was EUR 3.9 billion. This is an increase of 11%, reflecting higher group sales, with a stable pricing penetration, but also the challenges from the supply chain. Group operating return on sales in the first half of this year was 18.9% and 19.5% in the second quarter. Lutz will give you more details on the financials later. Given the economic situation and the ongoing supply chain challenges, these are strong results that give us a strong foundation for the full year. We are therefore confirming our full- year 2023 outlook statements. At the same time, we are expecting the macroeconomic and supply chain challenges to persist in the second half of the year.
Our deliveries to customers in the first six months of 2023 were up by 15% compared to the previous year, despite model cycle changes and ongoing supply restrictions. This is a very pleasing result so far. We posted gains in every sales region, which is proof that our products are in a high demand around the world. We are benefiting from a well-balanced share between the regions. 25% in North America, 32% in Europe, 26% in China, 17% in overseas. The launch of the new Cayenne has been very satisfying so far. We have posted over 30,000 orders since its presentation in April, even though the car has not even reached the showrooms of our worldwide Porsche centers yet. The order mix demonstrates that our customers are making good use of the opportunity to individualize their vehicles.
Deliveries to customers have started in several markets. Introduction to China is planned for September. We are benefiting from a recovery of the supply chain for commodities, chips, and commodity parts. Major challenges remain in terms of availability and price inflation for many of the components that are differentiating our products, and parts that are in high demand from our customers. We still have to be very flexible in our day-to-day business and production planning. This is reflected accordingly in waiting times, unit sales, and costs, and we expect these challenges to persist in the future. Once again, to be clear, it's about the special parts that are differentiating our products, not the commodity side of the supply chain.
Regardless of these challenges, we keep investing intensively in our development, in innovations, and in our Porsche ecosystem, so that we can continue to offer our customers the products and services they expect from us. We have taken the next step on the way to tailor-made, high-performance, better results. Since May, we have been the sole shareholder of Cellforce Group. The aim is to scale up the cell manufacturing process in the medium term, if necessary, also at other locations. We are prepared for the entry of new investors. Let me summarize. The situation is challenging, but we have a clear plan for the future of Porsche, and we keep putting it into action consistently. For further details, I now hand over to my colleague, Lutz Meschke.
Yeah, thank thank you, Oli. Good morning, welcome also from my side, everyone. In the next couple of minutes, I will share the major milestones we have achieved in the first half of 2023 with you. Overall demand for personalized value Porsche cars remains satisfying and cancellations are low. This reflected in the number and the mix of incoming customer orders in the first half of the year. Unchanged, the 911 is the largest order book, strong mix, and longest waiting time, around a year, by average across all derivatives. The first two quarters of 2023, we posted very satisfying wholesales and deliveries to customers. This success is a great team accomplishment of procurement, production, and sales. All of them are dealing with significant challenges on a continuous basis. Deliveries to customers increased by 15%.
Germany, Europe, as well as the area overseas and emerging markets, are growing over proportionally, making our regional mix more balanced. The sales increase was led by all product lines at Taycan, where we continuously face significant supply disruptions. The BEV share was 10.8% in the first half year. From now on, we expect Taycan sales to benefit from improving parts availability and higher supply. Achieving our BEV target of more than 12% for 2023 will be challenging. In the first half of 2023 at the group level, we achieved a revenue of EUR 20.4 billion. This represents an increase of 14% compared to the same period last year, and is mainly due to higher group sales with a stable price penetration.
The group operating profit increased by EUR 372 million to EUR 3.9 billion in the first half of 2023. This translated into an operating return on sales of 18.9%. In the first half, we had to digest higher costs compared to last year, resulting from an inflationary environment, as well as intensified sales activities, digitalization, and increased motorsport engagement. The earnings per preferred share amounted to EUR 3.04. At EUR 3.7 billion, the automotive segment's operating profit in the first half of 2023 exceeded the prior year figure by EUR 392 million. This accomplishment was a result of higher sales with stable pricing and continued beneficial product mix, slightly offset by higher costs, as well as spending and investments into our product and innovation portfolio.
The automotive sales revenue of EUR 18.9 billion, the operating return on sales for automotive was 19.3%. Automotive EBITDA rose by EUR 488 million to EUR 4.8 billion, corresponding to an automotive EBITDA margin of 25.6%. The first six months, we were able to produce more vehicles than in the same period of last year. In this context, let me comment on our balance sheet and the increase in inventories and finished cars. At Porsche, this is the normal course of business as our production shuts down for the summer holidays. Furthermore, the vehicles and transfer of the new Cayenne to our dealers also had an impact.
Despite our high level of investment activity into product, innovation, plants, and our ecosystem, we achieved a net cash flow in our automotive business of EUR 2.2 billion in the first half of 2023. Net cash flow margin for automotive was 11.7%. Please note that we also had seasonally higher cash outflows in the second quarter for bonus payments and a pro rata delayed tax payment, in addition to the increased inventory and investments. Revenue from the financial services segment increased to EUR 1.7 billion. The operating profit in the financial services segment amounted to EUR 174 million in the first half of 2023. The result was impacted by valuation of interest rate hedges and derivatives outside of hedge accounting. This is a part of regular refinancing activities.
Our financial services penetration in the first six months was 14.8%, which was more than 200 basis points lower than at the end of 2022. This development reflects that we pass on the market terms in our offers. As of June 30, our automotive net liquidity decreased by EUR 1.9 billion to EUR 6.4 billion compared to the end of the fiscal year. This is the result of the positive contribution of net cash flow, and on the other hand, of the cash outflow of the last payment in context of the profit and loss agreement and domination agreement with VW, which were terminated in the meantime. Investing in product innovation to better serve our customers is one of our key priorities.
In the first half of 2023, we spent EUR 1.5 billion on research and development, 18% more compared to last year. Most R&D expenses in the reporting period were due to the conversion of the product range towards electromobility. The R&D ratio was 8.2%. Own work capitalized amounted to EUR 1.2 billion in the first six months of 2023. The increase is due to the rising expenditure for ongoing projects, which are close to being ready for series production. Depreciation and amortization of capitalized development costs amounted to EUR 427 million. Let's move on to the outlook for 2023. The Porsche AG Group continues to be confronted with a challenging macroeconomic environment.... challenges in securing supply chains and parts supply, as well as generally rising cost levels and various geopolitical tensions.
At the same time, the Porsche AG Group is investing extensively in its development, innovations, and the entire Porsche ecosystem for future products and services. Despite a challenging overall global situation, the Porsche AG Group confirms its forecast for the full year 2023, published in the Combined Management Report, also regarding the conditions, provided that the global and supply situation does not deteriorate significantly. Based on these above-mentioned assumptions, the Porsche AG Group expects an operating return on sales for 2023 in the range of 17%-19%. This forecast includes assumed group sales revenues in the corridor of around EUR 40 billion-EUR 42 billion. Our forecast for the automotive segment is a net cash flow margin between 10% and 12%, and an automotive EBITDA margin between 25% and 27%.
As part of the 2023 sales forecast, the company expects fully electrified vehicles to account for up to 12%-14% of total new vehicles delivered to customers. However, this target requires a far better supply situation for Taycan in the second half of 2023. Thank you very much for your attention. We are very much looking forward to answering your questions now.
Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. In the interest of time, please limit yourself to two questions only. If you're using a speaker equipment today, please leave the handset before making your selection. Anyone with a question may press star and one at this time.
Thank you very much for the introduction. Oli, Lutz, thank you very much for the intro. As I can see that we have quite strong interest on the call, and we have quite limited time this morning. As said by the operator, please be so kind to limit yourself to one question in order to give everybody the chance to be part of this Q&A session. With this, we start then with Tim of Deutsche Bank, then we take George of Goldman's, and thereafter, it's José of JP Morgan.
This is probably for Oli. You emphasize a lot on the luxury element of your story, rightfully so, when we look at the ASP surpassed. Listening to the press call just now and also your remarks at the beginning, you talk a lot about negative points. There's cost headwinds, supply chain, macro challenges. Some of the luxury names that already presented, like LVMH, for example, reported great numbers. They didn't talk about macro challenges at all. Can you contextualize this for us a bit? Why are you making it such a key pillar of your communication today, given you just made 20% margin. You could also just be happy with that. Do you indeed see softer demands from your clients on pricing and orders? Also on the logistic and supply chain side, can you help us understand just how these supply chain issues are bothering you?
Is it limiting your growth, or is it just costing you more money? Thank you.
Tim, I think our figures represent how strong we are. The luxury segment isn't affected so strong. We see, for example, a volatile Chinese market where the recuperation still isn't here at expected. We mention these points that we have to watch the situation in the different regions of the world. By now, with the strong figures we are presenting, we are not so affected for being so strongly positioned in the luxury market. We are not alone in the world, that is being aware what's happening there and taking the right decisions, having the right flexibility in terms of product.
We are still in a very strong demand from our customer side, to be very clear.
Absolutely. And I think it's, it's also more a pro- proactive reaction on, on a potential question from your side. Uh, is it not possible to increase our, uh, forecast figures? Uh, this is the potential question, and, and therefore, um, we address, uh, very clearly that despite, uh, a very promising, f- uh, promising, uh, order bank situation and satisfying order intakes, um, uh, we, we have also some aspects we have to consider regarding our, uh, forecast figures. And, uh, we already mentioned that we, uh, will increase our, our prices for the new model year, uh, started now in, in June by about five percent. And, and of course, this is not reflected now in the, in the, in the first half year figures.
On the other hand, we will have these inflationary effects, and therefore, we feel quite comfortable with our existing forecast. Therefore, we will stay with our forecast figures when it comes to revenue and when it comes to operating income.
Okay, thank you. That's very interesting. If I may just follow up on that, sorry, Björn, judging from the comments that I got from investors during your press call already, this is more meant, Lutz, to your point. You're explaining why you're not increasing your guidance, a lot of investors actually interpreted your very negative remarks earlier today as a preparation for a very weak Q3. You were suffering from an inventory problem, potentially dealer compensation payments in Q4. There's a few discussions about that in China. Quarter-on-quarter margins being down in the second half and these type of things. It's more explaining why it's not much better, rather than preparing us for it getting substantially worse.
Absolutely. No, you know it very well. We are very clear in our positioning, and we are very confident to see also a very strong second half year in 2023 . We can be very confident because we have a very strong order bank. We see very satisfying order intakes. Therefore, there is no need to have a fear regarding the second half of the year. Nevertheless, we are very, yeah, a conservative company when it comes to our forecasts regarding income, sales, and also net cash flow. Therefore, beside all the opportunities we have, we have to address also the negative aspects when it comes to the inflationary environment.
Thank you very much.
Always aim to deliver, and we will keep this position in future.
Thank you, Oli.
The next one in the row then would be George. After, we have José, and thereafter, it's Henning of Barclays.
Thank you, thank you for taking my questions. The first question I had was just with respect to the supply chain constraints and how much that's holding you back. I think you've been clear in your communication that you haven't been able to fulfill the orders with respect to Paint to Sample, some high-end models due to carbon fiber shortages, and we're also seeing other constraints around lighting options, et cetera. How much higher could the revenue per unit have been, and also the auto return on sales, if you had not faced these disruptions? Can you give us any kind of indication of the magnitude of what is being left on the table at this point?
The second question I had was just with respect to the news flow around Audi leveraging a SAIC platform, which perhaps we'll learn more about tomorrow. This does suggest that there's potentially a delay to one of the Volkswagen Group-developed battery electric vehicle platforms. Does this pose any risk to Porsche's product plans and the timing of the introduction of Porsche's vehicles based off SSP in coming years? Thank you.
Yeah, starting maybe with your first question, George. Unfortunately, it's just a theoretical question, but it shows the huge potential we have in the upcoming months, since we will be able to catch up when it comes to our supply chain constraints, and that gives us the potential to further increase, yeah, our product mix in the upcoming months. Please, please understand that we cannot give any more information about the additional potential. It's theoretical, but we can deliver more if we catch up regarding our supply chain constraints. That gives us the confidence also for the upcoming months and the next year.
Yeah, may I come to the second part of your question, the product cooperation from Audi with SAIC? That's one part of the China for China strategy of Volkswagen Group, and that does not affect any product development we are doing together in the group. It does not affect any time affection and so it's a single issue Audi is doing in China, which does not interfere in the Porsche business.
Great. Thank you for the clarification.
Thank you. The next one will be José, it's Henning, thereafter, it's Stephen of Société Générale.
Good morning, José with JP Morgan. Hi, Oli and Lutz. Just one question, please. Capitalized R&D, can you comment what happened in the second quarter, and how should we think about this for the remaining of the year? Thank you.
Thank you, José, for this question. The expense R&D and the depreciation on capitalized R&D combined remains with about 3.9% of revenue, and that's comparable to quarter one, as well as first half of 2022. That means it's a very stable situation when it comes to the impact for our profit and loss statements.
We still remain stable into the second half of the year.
Absolutely.
-guessing. Thank you.
Absolutely. It will also in the second half of this year.
Thank you so much. Thank you.
Very good. The next one then will be Henning, then it's Stephen, and thereafter, it will be Michael of Kepler.
Yeah, thanks, and good morning. Can we please talk about the composition of further revenue growth between specifically volume, price, and mix? I very much appreciate you're looking at this 4%-8% price increase coming through in the second half now, but so far, revenue has still been quite volume- driven. I'm not so much interested in the second half, but perhaps more conceptually. I think at the IPO stage, we talked more about a pivot of revenue growth more towards price and mix. Of course, you had a very tough comp in Q2 last year, so we weren't maybe expecting so much for this quarter alone.
Just going forward, also in the context of this luxury company proposition, can you give us a bit of comfort that we're about to see this pivot now towards price mix, and you're perhaps consolidating volumes more at the current level if we were to annualize the H1 volume, for example? Could you talk a bit in that direction? Thank you very much.
Yeah. Yep. No, it's absolutely right that volume is not our target, but it's at the end, the volume growth is a consequence of our brand strength, of our product range, and of our unique customer experience. Of course, we also plan the moderate volume growth for the upcoming years. What's more important, we will explore further price potential. We are striving for better product mix and higher individualization rates. That's very important. It's in the focus of our strategy, and we will have a lot of additional growth drivers. In future, we see very strong new markets, first of all, in the overseas and emerging markets region, Asia, Middle East, and also South America. We have, of course, also new target groups.
It's the revenues , and it's a higher share of females we have to strive for, and that gives us a huge potential for the future to grow, not only volume-wise, but first of all, grow significantly when it comes to our operating profit margin. I have to underline that we have seen already a very strong second quarter. This year, we reached an operating margin above 19%, and I think these are excellent figures, and that means we are very good on the path towards our road to a 20% operating margin. Our.
Just when we... Yeah.
Yeah, product is core of our luxury strategy. We see a very high demand, especially for our special editions, like the 911 Dakar or the 911 GT3 RS. We can mention it with a strong increased mix of the two-door sports cars. We have a very strong pillar in the SUV segment. The Panamera accounted for 10% of sales volume, so especially in the higher segments. We are preparing ourselves with our Exclusive Manufaktur or our program, Sonderwunsch, where we fulfill all the dreams of our customers, and on the other side, with a very high profit margin.
Thank you. Just to reconfirm, when we think of that midterm 7% - 8% revenue growth that we talked about, at the IPO stage, it's still true that clearly less than half of that is meant to come from volume, and the bulk of it is meant to come from price mix, right? Within the 7%- 8% midterm revenue growth.
The major part will come from price and better product mix and higher individualization rates.
Very good.
Thank you.
The next one then will be Stephen, then it's Michael, and thereafter, it's Horst of Bank of America. By the way, please note that we unfortunately had to close now the list of questions, so after Horst, it will be Michael of HSBC, Daniel of Bernstein, and Daniel of Stifel. After this, we are unable to accept any further questions.
Yes, thank you. Steve Reitman here from Société Générale. I understand that you introduced the Paint to Sample option on the Cayenne with a price under EUR 10,000, and I understand that the response has been very strong on this. Could you talk more a little bit about this, and do you think it's been underpriced relative to the demand you're seeing on this? Because obviously, this speaks to the ability to personalize more and customization, which is obviously part of the whole luxury story. Thank you.
Yeah. Paint to Sample was a very important initiative during the last years, and we see a very strong demand in all our model ranges and also in the Cayenne, what we established in Bratislava. I think that there might be still some potential for pricing in the future. We see this Paint to Sample as one important part of our individualization strategy, because with Paint to Sample, there are coming more individualization issues to the cars. So, we have potential for pricing in the future.
Thank you.
Very good. In order to give everybody the chance for a question, so let's speed up. Next, Michael then Horst, and then Michael of HSBC.
Yeah, thanks. Morning, everyone. Mike from Kepler Cheuvreux here. I have a very simple and quick question: To which extent is the supply of componentry for the forthcoming Macan BEV subject to constraints? If so, do they endanger the planned timing of the ramp-up of the model the way you can foresee it right now? Thank you.
Very quick answer to your question. We are in the final testing phase of the Macan. I'm personally very passionate driving the car, I'm very convinced what we will offer in terms of driving abilities and infotainment, for example. We can confirm that we will be in the market in 2024, as we promised before.
2024 consists of 12 months, as any year does, so you could still shift inside that year on the timeline, if you wanted to. Back to my question, are you currently seeing any concrete signs of a supply shortage of key componentry for the Macan BEV, please?
There are no specific supply chain issues for the Macan.
It's a software issue, as you know, and we want to be 100% perfect when we come into the market. To do the market introduction, it's a process, and it's not only 1 date. We will start with our dealer partner event, and then going step by step in the regions. That will happen in 2024, as we said during the last year.
All right. Thank you.
For us, it's crucial to solve all the software bugs before the cars goes to the customer.
It's Horst, Michael of HSBC, Daniel of Bernstein, and then Daniel of Stifel.
Yeah. Good morning. Can you hear me?
Yeah.
Okay. Hey, thank you. Just one brief one for Lutz maybe. It's on foreign exchange effect. I remember at the IPO, you were saying that operating margin gets boosted by FX effect by something like 2%. We have seen a quite strong depreciation of the renminbi in H1. I want to understand, what is now the impact of the FX effects going forward, but also, what has there been in H1. Is there potentially a negative margin effect from that? Has there been already a potential negative effect? Maybe you can explain on that. The last one, if I can sneak that in, it's for Oliver. Just want to understand your view on Formula One. Do you still think Formula One belongs to Audi, or it should be better placed at Porsche? Thank you.
Thank you, Horst, for this question. You are right. The last year was affected by about 200 basis points due to the strong FX situation. Unfortunately, we see a similar situation also in 2023. We forecast also a similar impact or effect for 2024 due to our long-term-oriented FX hedging policy. Therefore, we will be not seriously affected by the weakening renminbi, because we have the long-term-oriented hedging policy in place also for the entire year 2023, and therefore, we expect a similar impact. That means also, a boost of about 200 basis points in our margin. Same situation as last year.
Okay, thank you.
Coming to your F1 question, as you know, we check opportunities to get into the Formula One together with a Red Bull cooperation. For us, it was very important not being only engine supplier, but also having a important part of shares of the racing team. In the later process, Red Bull decided not to sell shares, which is totally okay for us, up to them. That was important for our deal, we decided not to get into. Up to now, there are no further activities in F1, the Audi engagement together with [inaudible] is totally separated from the activities we have had in Porsche.
Okay. Thank you.
Let's rush on in order to get this finished, that you can jump on the other call. This is now Michael of HSBC, Daniel of Bernstein, and Daniel of Stifel, and then we finish.
Morning, folks. Quick one from me. I just want to go back to R&D capitalization, because I'm not sure I understood the answer. I've got R&D capitalization sitting at around about 84% in Q2 versus 71% in Q3, and you state in the report that it was related to the launch of new models or the new models going into production phase. I just wonder if you could elaborate. I mean, we've got a fair idea on what's in the pipeline. Is it related to products we know? Is it different products? Any color you could give on that front would be helpful. Thanks.
Yeah. Michael, it's very important to know that the capitalization rate is highly depending on the life cycle of our products. Now, we have a lot of products in place which are very close to serious production, and, therefore, we will see a higher capitalization rate. What's very important for us is that we have a stable situation when it comes to expense R&D and the depreciation as a sum. Because it's very important that we have a stable situation when it comes to our P&L impact, and that's about 3.9% of revenue, and that's absolutely comparable to the first quarter, as well as the first half of 2022.
As I've mentioned before, we will see also a stable situation in the upcoming months. That means in the second half of this year and also in the upcoming year. Therefore, yeah, it's a stable situation.
I know I'm conscious of the essence, is the delay of the Macan an impact? Effectively, it's somewhat concatenated the launch schedule. It's put everything together a bit more than it would have been normally.
No, the overall situation is not heavily infected, or affected, by the Macan delay, because all the hardware issues are ready. So far, we are in the final testing phase, and therefore, there is no significant impact on this side.
Okay, thank you very much.
Daniel?
Thanks. Daniel from Bernstein. Thanks for taking my question. Could you give us some details on the exciting Taycan refresh that's coming up? Just wondering about the changes to drivetrain technology, battery, software. Maybe specifically, will the next Taycan kind of benefit from the Macan's 1.2 software? On the range in the Taycan, will you kind of be able to get close to or match your key competitor's range on that refresh?
Okay, Daniel, I think you have to be a bit patient, before we open all the details, for the new Taycan. It's clearly, that, we, will improve, the car in terms of, driving abilities, in terms of range, in terms of charging. There's a lot to come, but quite too early to talk about in detail about it.
The last one then will be of Daniel from Stifel. Daniel, you're still there? Okay, thank you very much to all of you. Thank you very much for joining. We fully understand that we kept you today with all the disclosures, pretty busy. Still, investor relations stays at your disposal. For all of you who are already on holidays or about to travel on holidays, take the time off, recharge the batteries, and we all look forward to see you after the summer break, and for the ones of you waiting for our cars, also to make you very happy Porsche owners. Thank you, and bye-bye.
Thank you to all. Thank you.