The following is excerpted from the question-and-answer section of the transcript.
(Questions from industry analysts are provided in full, but answers are omitted - download the transcript to see the full question-and-answer session)
Question: Akshat Kacker - JPMorgan Chase & Co, Research Division - Analyst
: Akshat from JPMorgan. And congratulations on a very strong quarter. Three questions from me, please. The first one is on your upgrade to your
revenue guidance. Can you talk about your underlying market assumptions for FY '21 versus IHS at 83 million units? And also, if you could highlight
key product launches and SOPs that will drive the increasing outperformance into the second half, either by product or by region. That's the first
one. Okay. I'll follow up with the other two after this.
Rolf Breidenbach - HELLA GmbH & Co. KGaA - Chairman of Management Board, President & CEO of Hella GeschSftsfnhrungsgesellschaft mbH
Yes. With regard to the launches, we will have significant launches in the area of -- or currently in significant launches in the area of energy
management in Europe as well as in China. We also have -- will realize additional sales in the area of ADAS. And we will have a specific -- a focus on
lighting headlamp launches in China. These are, let's say, the main direction where we see overproportional growth with regard to the regions.
With regard to the market assumptions, Mr. Schaferbarthold will give you more detail.
Ulric Bernard Schaferbarthold - HELLA GmbH & Co. KGaA - MD of Finance & Controlling and Member of Management Board - Hella
GeschSftsfnhrungsgesellschaft mbH
To the market, as I said, we see, especially Europe as, let's say, volume-wise, the region with the highest risk, there, we would see the risk up to 20%
in our market view from today's perspective at the maximum. We also assume that related to the U.S. and NAFTA market, there could also be a risk,
where from today's perspective also, I would say, somehow in that range, we could also see, let's say, a risk in the same area.
For China, we see, let's say, in both directions. On one hand side, as I said, volume could be even higher. So that -- but on the other hand side,
volumes, especially due to risks on the supply chain, but also logistics chains, but also related to pandemics could also go into the other direction.
So all in all, from our perspective, if you come from today's IHS November numbers, which are actually at around 83 million vehicles. It could be
from our perspective around 1 million or 1.5 million more. But it could also be that the market drops down to a level where we are also 5 million
to 6 million lower.
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DECEMBER 08, 2020 / 9:30AM, HLE.DE - Preliminary Q2 2021 HELLA GmbH & Co KGaA Investor Update
Call
Question: Akshat Kacker - JPMorgan Chase & Co, Research Division - Analyst
: Understood. The second question is more on the medium term. This second -- strong second quarter will most likely mean that you are at the high
end of your margin guidance, probably 8% at the end of this year, which will be very comparable to FY '19 levels. So as we look ahead, have you
essentially freed up capital to pick up spend on your energy management portfolio? The question is how are you thinking about portfolio positioning
towards high voltage and your R&D spend going forward?
Rolf Breidenbach - HELLA GmbH & Co. KGaA - Chairman of Management Board, President & CEO of Hella GeschSftsfnhrungsgesellschaft mbH
Our R&D spend will continue to be at a level of around 10%. And of course, one focus will be the high-voltage energy management product area
because here, we see significant growth opportunities and we will continue to invest into this area. With regards to our cost position, as I said, we
now have to, on the one hand, continue to invest into our processes and structures, for example, our IT infrastructures, also continuous improvement
programs have -- are already relaunched.
This, of course, will put a kind of burden on our cost structure. But at the same time, we are now thinking about how to even lean up our overall
activities because we learned a lot in the crisis with regard to mobile working, less traveling, doing internal projects much more efficient than
before, so to at least partly balance out now the additional investments we now need to do.
Question: Henning Cosman - HSBC, Research Division - Analyst
: I was just going to ask you a clarification in, Dr. Breidenbach, your introductory remarks, I think that the second last point was partly about the
component shortages that we just talked about but also about the possibility for further lockdowns. And of course, we've partly seen that in
November now with France and U.K. being sort of partially locked down back to only click and collect. And accordingly, of course, the sales were
down a bit. So we're getting lots of investor questions around this and how you effectively see this playing out. So November was, of course,
included in your quarter already.
So if you could just talk a bit about current trading. I believe in your comment, you said there's now no assumption of further lockdowns in your
forecast and implied in your increased guidance. I think Mr. Schaferbarthold, of course, painted a -- well, I mean, not, of course, but painted a slightly
different picture with these wide ranges that you're expecting also with respect to IHS. So I mean it's a very long question. But ultimately, I'm just
hoping you could talk a bit about current trading and how you manage the flexibility that you need to have.
Rolf Breidenbach - HELLA GmbH & Co. KGaA - Chairman of Management Board, President & CEO of Hella GeschSftsfnhrungsgesellschaft mbH
Yes. With regards to the flexibility, I think we have all means in our hands because we are now very experienced how to ramp down all our activities
worldwide in days. Therefore, short-time work and similar measures in all the other countries in Europe, in the U.S., Mexico, in China are, let's say,
ready to implement, if necessary. Here, we are very flexible. And the same is true for all, let's say, the internal activities.
And we can, of course, switch off all these activities from 1 day to the other. And this flexibility, when it's necessary, it will come. And I think the
margin development also in the very difficult months of March, April and May but also now, I think at the first half of this fiscal year shows that this
is totally under control. So our operational system is very transparent for us worldwide and very flexible.
With regards to the outlook of the market, and this, of course, is also reflected in a huge range here of our guidance, it's unfortunately very difficult
to assess. So far, we see, as Mr. Schaferbarthold said, that China very strong. Therefore, we see here an upside, but also when, of course, it comes
worse in a downside.
With regard to Europe and NSA, we only -- compared to IHS, we only see a downside. And this has to do, of course, with the COVID discussions,
which is currently going on. We do not know what Germany will decide in the days to come. And some European countries already have strengthened
its -- and increased the number of measures. So it's uncertain. So far, the demand in our systems are high. But this, of course, can change.
And with regard to this electronic bottlenecks, it's very difficult to assess. There is a structural problem that we are facing from my perspective in
the next 3 months. And usually, the automotive industry is able to avoid significant lockdowns. But it will be a tough fight. And therefore, here, we
also see a risk. And -- but as both Mr. Schaferbarthold and myself tried to explain, it's so difficult to really forecast this and to also assess the impact
of the one or the other measure.
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DECEMBER 08, 2020 / 9:30AM, HLE.DE - Preliminary Q2 2021 HELLA GmbH & Co KGaA Investor Update
Call
What we can see, of course, is in the Aftermarket, the business, I think, in the different workshops country-by-country is going a little bit down, not
significantly, but we see first signs of less activity, especially, for example, in Spain and France. And also with regard to the auto market, you know
the figures, the one or the other European market starts to weaken again. So the first signs of a, let's say, reduction of demand can be seen at the
horizon. I try to be very careful because it's so unsecure.
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