HELLA GmbH & Co KGaA Q2 2021 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. I have 3 questions, please, the first one on end markets. Can you give us some kind of indication of production trends that you're seeing in January? And especially in Europe, how has the restart of production been in the new year? You did mention lack of clarity, but just trying to understand what the recent wave of lockdowns have meant for OEM order intake and your production as you look into January and February. That's the first one. The second one, sorry to come back on the chips shortages, is there a way for you to quantify the impact how much disruption do you foresee? And as you mentioned, Q1 will see majority of the impact. Any way to quantify that in terms of production? And the third one on Aftermarket and Special Applications, both divisions again posted very strong profitability, more than 13% in the quarter. Can you just highlight a few drivers? And how do you expect these divisions to evolve over the coming quarters, please? Rolf Breidenbach - HELLA GmbH & Co. KGaA - Chairman of Management Board, President & CEO of Hella GeschSftsfnhrungsgesellschaft mbH Yes. Perhaps starting with your third question, so with regards to the Aftermarket, the spare parts business has recovered in the second quarter. And we also expect in the third and fourth quarter a positive development. So the -- this is -- currently, we are here very optimistic. Also the investments into the garage businesses are at a good level. Therefore, also our Hella Gutmann activities, with regard to these diagnosis devices, are running again now at a good level. So both areas were strong in Q2. And we expect that this will continue also in the third and fourth quarter. With regard to Special Applications, here, the picture is a little bit more diversified. On the one hand, we have strong sales in the area of our agriculture business. Other areas like buses, for example, are much weaker. And also, the mid-term outlook here is more difficult to assess. But overall, we also see at least a solid development. But as I said, the main driver currently is the agriculture area. But we expect this to continue. So with regards to disruptions of our supply chain and the production facilities and production lines of our customers. This is very difficult to assess. Currently, we have, here and there, stop-and-go activities in our plants. And you know from the press that our customers, unfortunately, here and there, have had to shut down lines or plants. We have established a bottleneck task force in all our regions due to the fact that these supply chain risks have increased significantly in the recent weeks since mid of September. Bottlenecks are across the board at all major chip manufacturers, as I said. And to give you a feeling, the risk affects several thousands of HELLA products. As I said, we have formed a task force. The discussions with the manufacturers are on a daily basis. The focus, of course, is that we have a rolling forecast on a 2-weekly basis. But every day, of course, new challenges are occurring. But so far, we were able to handle all these things. And so far, HELLA has not caused any production standstill at the customer side. But as I said, this is a day-to-day, week-to-week challenge. We now also see in our systems that customers are reducing their demands. But this has started only days ago, and we now have to look how the consequences will be. And yes, we are observing this every day. As I already said, Q1 will be a challenge. Q2 -- or Q1 of this calendar year will be a challenge. Q2, the perspective of -- and expectation of many chip suppliers is that they then can at a full range cover the demand of this quarter. And Q3, there is a chance to recover. So the first question will be the answered by Mr. Schaferbarthold. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 14, 2021 / 9:00AM, HLE.DE - Q2 2021 HELLA GmbH & Co KGaA Earnings Call Ulric Bernard Schaferbarthold - HELLA GmbH & Co. KGaA - MD of Finance & Controlling and Member of Management Board - Hella GeschSftsfnhrungsgesellschaft mbH Yes. In addition to what Mr. Breidenbach said, Akshat, let's say, as I said, December was good. There, we have basically seen no big deviations to what was in the system and the sales development was very good. January, a little slower start, but no big, let's say, deviation. So -- but as Mr. Breidenbach said, we will now -- if we look at the systems, first changes have been done. But overall -- and you could perhaps also compare that to the situation when we started into the lockdown last year in March, so the customers are hesitating really to do big changes now. So because there is so much uncertainty, so we have now to see on a daily basis, so if you ask me now on a prognosis now to February. So as of today, no change visible. But we would assume that changes will come. So uncertainty is very high.