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Introduction & Market Context
Hella KGaA Hueck & Co (ETR:HLE) reported its Q1 FY 2025 results on May 8, 2025, showing broadly stable performance despite challenging market conditions. The automotive supplier maintained sales and profitability near prior-year levels, with strong electronics segment growth helping to offset declines in lighting and lifecycle solutions.
The company reported this performance against a backdrop of modest global light vehicle production growth of 1.3% in Q1, primarily driven by the Chinese market which saw production increase by 11.5%. However, Hella expects the global automotive market to decline by 1.7% for the full year 2025, with production dropping from 89.5 million units in 2024 to 87.9 million units.
As shown in the following market outlook slide, regional production is expected to vary significantly, with Americas declining by 6.9%, Europe by 3.1%, while Asia/Pacific is projected to grow slightly by 0.4%:
Quarterly Performance Highlights
Hella reported Q1 FY 2025 sales of €1,997 million, representing a slight decrease of 0.3% compared to the prior year. Organic sales declined by 0.8%, partially offset by positive currency effects of 0.6%. The company’s operating income margin stood at 5.5%, marginally below the prior year’s 5.6%.
The following slide illustrates the company’s overall sales and profitability performance:
Despite the slight decline in sales, Hella maintained its profitability through cost-saving measures. The company’s gross profit margin decreased by 45 basis points to 23.3%, while the R&D ratio improved by 26 basis points to 10.4%. SG&A expenses decreased by 1.3% year-over-year.
Net cash flow was negative at €61 million, compared to negative €51 million in the same period last year. However, the company noted that excluding factoring effects, net cash flow improved year-over-year, with higher operating cash flow partially offsetting working capital increases.
Segment Performance Analysis
Hella’s performance varied significantly across its three business segments, with electronics showing strong growth while lighting and lifecycle solutions faced challenges.
The electronics segment was the standout performer, with external sales increasing by 8.9% to €804 million. This growth was driven by successful radar business in the Americas and the ramp-up of existing series programs in Europe. Operating income in this segment increased by 1.6% to €52 million, though the operating margin declined slightly to 6.0% from 6.3% due to asset write-downs related to slower electrification.
The following slide details the electronics segment’s performance:
In contrast, the lighting segment saw external sales decline by 5.7% to €932 million, primarily due to the discontinuation of various projects, particularly in the Chinese and American markets. Despite this sales decline, operating income in lighting increased slightly to €31 million, with the margin improving to 3.2% from 3.0%, supported by material cost savings and fixed cost reductions.
The lifecycle solutions segment experienced the most significant decline, with external sales dropping by 8.7% to €251 million. This was attributed to very low demand in the commercial vehicle business, especially in agriculture, trailer, and construction sectors. Operating income in this segment decreased by 18.5% to €28 million, with the margin declining to 10.8% from 12.1%.
Regional Performance
Hella’s regional performance showed significant variations, with strong outperformance in Europe and the Americas contrasting with underperformance in Asia/Pacific.
In Europe, which accounts for 59% of group sales, Hella achieved 1.7% growth despite a 6.7% decline in light vehicle production, representing an outperformance of approximately 840 basis points. The Americas region, contributing 21% of group sales, saw 8.1% growth against a 3.6% decline in production, outperforming the market by around 1,300 basis points.
However, the Asia/Pacific region, accounting for 20% of group sales, experienced a 12.3% decline despite 6.6% growth in light vehicle production, underperforming the market by approximately 1,800 basis points. This underperformance was primarily attributed to the expiration of several projects in the region.
The following regional performance breakdown illustrates these divergent trends:
Cost-Saving Initiatives and Structural Measures
In response to challenging market conditions, Hella announced several structural measures in Q1 FY 2025 to improve competitiveness and reduce costs. These include:
1. The closure of HELLA Aglaia in Berlin by mid-2026, affecting approximately 175 positions
2. The closure of assembly activities in Großpetersdorf, with operations being relocated within the international production network, affecting around 225 positions
3. A voluntary severance program in Lippstadt, targeting a reduction of approximately 200 positions
Additionally, Hella is implementing tariff mitigation actions following the US elections, including establishing cross-functional task forces, optimizing the supply chain, and conducting pass-through agreements with customers regarding customs costs.
The company reported that its cost-saving measures are supporting profitability, with a 3% reduction in fixed costs achieved in the lighting segment. Tangible capital expenditure decreased by 10% to €135 million, reflecting thorough capital allocation and savings through standardization and automation of production processes.
Outlook and Guidance
Despite the challenging market environment, Hella confirmed its full-year 2025 guidance:
The company expects sales between €7.6 billion and €8.0 billion, an operating income margin between 5.3% and 6.0% of sales, and a net cash flow of at least €200 million. This outlook is based on S&P Global’s forecast of 87.9 million units for global light vehicle production and takes into account the tariff mitigation initiatives described in the company’s opportunity and risk report.
Hella’s key takeaways from the quarter emphasize a solid start to FY 2025 with reinforced measures to safeguard profitability and mitigate tariff impacts:
The company’s stock closed at €87.60 on May 7, 2025, up 0.34% for the day, and is trading within its 52-week range of €80.40 to €94.40.
Full presentation:
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