HELLA GmbH & Co KGaA Q1 2023 Earnings Call Transcript

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

Question: Akshat Kacker - JPMorgan Chase & Co, Research Division - Analyst : Akshat from JPMorgan. Three questions from me as well, the first one on R&D expenses. You have previously mentioned that R&D will continue to go up to support the strong order backlog, especially in the Electronics business. So what kind of levels are you thinking about for this year? And when do you see these investments tailing off based on your current order backlog? Also on the overspending that you mentioned on the R&D, do you expect to receive customer compensations on those extra expenditures maybe by Q4? That's the first question. The second one, Michel, you mentioned Shanghai Auto Show in China. What are the views coming out of that auto show, please? Are you more bullish or more pessimistic around the developments in the Chinese market in the second half? And the last one, I just want to make sure I understand the discussion on cost inflation. So probably asking that in a different way. In the first quarter, what were the net impact from inflation in absolute terms on operating profit, please, across the key buckets, raw materials, energy and labor, please?

Question: Sanjay Bhagwani - Citigroup Inc., Research Division - Analyst : I have got 3 questions as well. So my first one is on -- just going back on your commentary about Q2 and for the rest of the year. So just looking at the outperformance, is it -- so is it fair to assume that the outperformance will accelerate going into the Q2 and also Q3, Q4? And how are you seeing light vehicle production development as well in Q2? And on the margins, again, I think you mentioned that H1 margins could just be slightly lower than the midpoint and then full year could be at least at the midpoint. So yes, if you could provide some color on development for Q2 and H1, that would be very helpful. That's my first question. I'll follow up with the next one.

Question: Sanjay Bhagwani - Citigroup Inc., Research Division - Analyst : Sorry, I didn't understand the last one. The minimum figure you would like to see for the next quarter is what, did you say...

Question: Sanjay Bhagwani - Citigroup Inc., Research Division - Analyst : Yes, yes, that's very encouraging. The second one is on inflation. So maybe could you maybe provide a bigger picture color on the electronics cost inflation? I mean, I understand that the semi cost is still a headwind. But a lot more other electronic component inflation is coming down, like those components like inductors or capacitors, which are less customized to the autos and given the consumer demand is falling for like other consumer electronics. So maybe can you provide some color on are you actually seeing, let's say, nonpayment-related inflation coming down rather fast than you were expecting? And yes, maybe like what's the total proportion of your cost in electronics? And within electronics, what's the split between the non-semis versus semi components? Ulric Bernard Schaferbarthold - HELLA GmbH & Co. KGaA - MD of Finance & Controlling and Member of Management Board - Hella GeschSftsfnhrungsgesellschaft mbH Yes. I said already that we have seen in comparison to our reference point, EUR 60 million increase in material costs. Most of it was related to electronics. And originally, what I also mentioned was a reduction of around 1%. We compare to our original estimation in terms of material expenses, which is around EUR 20 million. This also, the vast majority is electronics. So we are around EUR 15 million lower in terms of electronics, which is exactly to the point what you said where prices partly are coming down. On the other hand side, it depends also on the different products specifically. So on some semis, what Michel was mentioned, we are still -- a significant bottleneck is there. There, the pricing is still high and even the demand on customer side on pricing is still increasing. So it's a very mixed picture so that overall, we feel that still electronic pricing is quite high, but as you said, with some of the electronic components coming down, but not all.

Question: Sanjay Bhagwani - Citigroup Inc., Research Division - Analyst : That's very helpful. And my last one is on Lighting margins. Could you please maybe explain the path to the margins? And then could you remind us, like, I mean, the key drivers on margins going to the midterm targets for the Lighting business?