Hella H1 2025 presentation: Electronics growth offsets lighting decline as margins hold

Introduction & Market Context

Hella KGaA Hueck & Co (ETR:HLE) presented its H1 2025 financial results on July 25, 2025, showing resilience in a challenging automotive market. The company reported organic sales of €4,015 million, nearly flat with a slight decline of 0.4% year-over-year, while maintaining an operating income margin of 6.0%, just 20 basis points below the prior year.

The results come amid a global light vehicle production market that grew by 3.1% during the period, primarily driven by China’s 11.9% growth. Hella’s performance reflects its ability to navigate regional disparities and segment-specific challenges through cost discipline and strategic initiatives.

As shown in the following chart detailing the company’s H1 2025 performance metrics:

H1 2025 Financial Performance

Hella’s reported sales declined 1.3% to €3,979 million, impacted by foreign exchange headwinds of 0.9% in the second quarter. Despite this slight decline, the company significantly improved its net cash flow, which increased by 33.6% to €114 million, representing 2.9% of sales compared to 2.1% in the prior year.

The company’s consolidated net income fell sharply by 64% to €70.3 million, compared to €241.8 million in H1 2024. However, this decline was largely due to non-recurring factors, as the prior year included a capital gain from the sale of BHTC shares.

Hella demonstrated strong cost discipline, reducing R&D expenses by 9.2% to €381 million and SG&A expenses by 1.5% to €300 million. Tangible capital expenditure decreased by 15% to €203 million, contributing to the improved cash flow.

The following chart illustrates Hella’s sales and profitability metrics:

The company’s net cash flow improvement is highlighted in this visualization:

Segment Performance Analysis

Hella’s performance varied significantly across its three business segments, with Electronics emerging as the clear growth driver.

The Electronics segment demonstrated strong momentum with sales increasing by 6.6% to €1,610 million, driven by the start and ramp-up of several series projects. However, operating income in this segment declined by 4.3% to €121 million, with the margin falling 60 basis points to 7.0%. This decline was primarily attributed to write-downs of assets for energy management programs due to slower-than-expected electrification.

In contrast, the Lighting segment experienced a 7.4% decline in sales to €1,838 million, impacted by the end of several series projects. Despite lower sales, the segment maintained its profitability with an operating income margin of 3.4%, slightly up by 10 basis points, thanks to lower operational costs and material cost savings.

The Lifecycle Solutions segment, which focuses on aftermarket and special applications, saw sales decrease by 6.6% to €496 million, primarily due to weakness in the commercial vehicle business. Operating income in this segment fell by 15.6% to €53 million, with the margin declining by 210 basis points to 10.6%.

Regional Market Dynamics

Hella’s regional performance revealed significant disparities, with the company outperforming market trends in Europe and the Americas while underperforming in Asia/Pacific.

In Europe, Hella maintained stable sales of €2,344 million despite a 3.3% decline in light vehicle production, representing an outperformance of approximately 330 basis points. This growth was primarily driven by the company’s radar business.

The Americas region saw sales increase by 1.9% to €822 million, outperforming the market by approximately 430 basis points as regional light vehicle production declined by 2.4%. This growth was supported by the ramp-up of programs in both Lighting and Electronics segments.

However, in the Asia/Pacific region, including the Rest of the World, Hella’s sales declined by 7.6% to €813 million, significantly underperforming the market which grew by 7.4%. This represented an underperformance of approximately 1,500 basis points, primarily due to end-of-production events in the Lighting segment.

The following chart illustrates Hella’s sales performance relative to market trends:

Efficiency Initiatives

To address market challenges and improve competitiveness, Hella has accelerated and expanded its efficiency initiatives. The company is implementing two major programs:

1. Competitiveness Program Europe: Focused on improving competitiveness and adapting capacities through capacity reduction, standardization, automation, and administrative cost reduction. The program targets operations, purchasing, production, and R&D, with 40% of measures being structural and 60% performance-related.

2. Project Simplify: A newly initiated global program aimed at making administrative and functional processes leaner and more efficient through process simplification, organizational restructuring, and function consolidation.

Together, these initiatives are expected to generate approximately €80 million in gross savings by 2028, with restructuring costs of up to €100 million.

The company has also secured significant new business, particularly in the Electronics segment, with three-digit million euro order intakes for innovative technologies such as high-voltage energy management, zonal control modules, and smart car access systems from premium European and US OEMs.

As shown in this overview of the company’s order intake:

Outlook and Guidance

Despite the mixed H1 performance, Hella has confirmed its full-year 2025 outlook, projecting:

• Sales between €7.6 billion and €8.0 billion
• Operating income margin between 5.3% and 6.0%
• Net cash flow of at least €200 million

This guidance comes against a backdrop of a global light vehicle production forecast of 89.9 million units for 2025, representing a modest 0.4% increase from 2024. Regional expectations vary, with Europe projected to decline by 2.5%, Americas by 2.1%, and Asia/Pacific expected to grow by 2.1%.

The company anticipates a volatile second half of 2025 but has implemented measures to mitigate potential impacts, including those related to tariffs.

As illustrated in the company’s outlook confirmation:

The key takeaways from Hella’s H1 2025 results presentation highlight the company’s resilience in a challenging market environment:

Hella’s H1 2025 performance demonstrates the company’s ability to navigate market challenges through segment diversification, regional adaptability, and cost discipline. While facing headwinds in certain segments and regions, the company’s focus on electronics innovation and operational efficiency positions it to maintain stability in an uncertain automotive market environment.

Full presentation:

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