Preliminary Q4 2020 HELLA GmbH & Co KGaA Investor Update Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Henning Cosman - HSBC, Research Division - Analyst : This is Henning from HSBC. Sorry, I'm afraid I need to come back to the guidance, and I appreciate you want to be conservative. So I'm not going to talk about the underlying markets so much, but just with respect to your own outperformance. I think, Mr. Schaferbarthold, you said at one point that you remain consistent with your historic communication with respect to outperformance. So even if I take the top end of your guidance relative to what you said, sort of optimistic ideal scenario, I think that only implies 3% outperformance, which is rather a bit less than what we had talked about historically. So I just wanted to ask you to discuss that for me again, please? The second question, yes, again, I think I need to come back on the EBIT element of the guidance. So if I just take both the midpoints of your guidance, right, and then adjust it for the EUR 75 million D&A relief, that basically implies a lower EBIT than in the current fiscal year that's just gone by. So I think Christoph also asked about the offsetting elements, but I just really find it quite extreme that you would make less EBIT considering that you already had some sort of disruption in the last business year already, so just from a bridge standpoint. And then finally, maybe as the third question, your main French competitor, they've recently been quite excited about now the volume pickup, specifically in the electrified models on part of the OEMs. So they're speaking very constructively about business momentum on components going into these cars. So I was wondering if you don't really share that. Or if maybe market shares informed the enthusiasm on part of your French competitor a bit more than yours? Or what you could maybe say on that? Rolf Breidenbach - HELLA GmbH & Co. KGaA - Chairman of Management Board, President & CEO of Hella GeschSftsfnhrungsgesellschaft mbH I will start it with the third question. And then my colleague, Mr. Schaferbarthold, will take over. Of course, we see a tremendous increase in the demand of the vehicles. And this will, of course, also support our sales. But percentage-wise, of course, it's supportive, but it will not change the overall picture. Ulric Bernard Schaferbarthold - HELLA GmbH & Co. KGaA - MD of Finance & Controlling and Member of Management Board - Hella GeschSftsfnhrungsgesellschaft mbH On the outperformance, so we -- as you know, it's very hard to predict exactly the outperformance. But there's no reason why the outperformance should not be, I would say, around the 5% we envisaged also in the past and we also see for next year. If you see what is the comparison or what is the starting point? We mentioned the EUR 5.74 billion. But if you make it, I would say, to the point exactly, we also have to reduce the relay business we sold last year. And then we are, I would say, spot on, on EUR 5.7 billion, more or less. We have not, I would say, mentioned that now because we didn't want to be too, I would say, detailed now and too complex then also in our reporting further on. But if you take that starting point, so basically, EUR 5.7 billion at the point. And from there, you take basically 2.3% on IHS Markit expectation and roughly 5% of outperformance, then you are very, more or less, very close to the EUR 6.1 billion we see as the upper range. So basically, that's somehow how we see it. No point of evidence that we say we do not see -- or we see something which should reduce our outperformance looking at our order book and the demand of our products, whatever. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 28, 2020 / 10:30AM, HLE.DE - Preliminary Q4 2020 HELLA GmbH & Co KGaA Investor Update Call Your second point mentioning then this bandwidth and the lower end, considering also the D&A. Yes, if you would deduct that, that would mean a reduction compared to last year. On the other hand side, we also assume that it could be that we see a further decline in sales. So down to a level of EUR 5.6 billion. And in addition, there will -- there are, I would say, risks from our perspective related to this very high volatility and then how much can we then really stream our operations to the optimum. For sure, that is day-by-day business to see -- to bring it to an optimum. I would say, as of today, we have been able to, but we also have to see that for -- in the last quarter, we were able also to fully shut down some plants. Then it's easier. If you need to run the lines and then you need also some, I would say, structures, where it's very difficult to flexibilize these. And this risk -- I would say, this is something which is somehow incorporated also in the bandwidth that this, let's say, high volatility remains, and somehow, we are not able to steer the operations to an optimum in this time period where the visibility remains as it is now.

Question: Akshat Kacker - JPMorgan Chase & Co, Research Division - Analyst : Akshat from JPMorgan. The first one on restructuring, again. Most of what has been announced today is again linked to headcount and redundancy payments. Can you talk about capacity utilization across your plants and the structural adjustments that you might be considering to your production network on a worldwide basis? Like in your initial internal review, how many plants do you think in your global footprint that could see challenge utilization levels if you have done some work around that? And can you confirm if those restructuring costs and benefits will come on top of what is announced today? That's the first one. And then I'll follow up with a couple more, please. Rolf Breidenbach - HELLA GmbH & Co. KGaA - Chairman of Management Board, President & CEO of Hella GeschSftsfnhrungsgesellschaft mbH So we see no restructuring necessities with regard to our global footprint because the orders are there, the equipment is installed. And whether our utilization is 70% or 80%, it doesn't matter. So there is no huge restructuring activities planned within our plants. We feel quite well positioned with regard to that. Of course, the utilization is fluctuating. In China, we are at a very good level near to 90%, 95%. There are also some plants in Europe and in Mexico, which are at the same level. Some are a little bit weaker. But overall, we are quite okay with the utilization so far. But we do not plan any restructuring on our production footprint. Again, we also do not reduce our capacity in our R&D footprint. We're only transferring capacities from high cost to low cost.

Question: Akshat Kacker - JPMorgan Chase & Co, Research Division - Analyst : Yes. And the last bit on raw materials, please, if you expect any material tailwinds in the year? Rolf Breidenbach - HELLA GmbH & Co. KGaA - Chairman of Management Board, President & CEO of Hella GeschSftsfnhrungsgesellschaft mbH No. I think here and there, we have some bottlenecks. But overall, no significant change.