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Hella KGaA Hueck & Co reported stable revenue of €2 billion for Q1 2025, consistent with the previous year. However, the company faced a significant decline in net income, which fell to €23.9 million from €3.3 million. Despite these mixed results, Hella maintained its full-year sales guidance and projected improvements in Q2 margins. The company’s stock remained unchanged at €87.6, reflecting a neutral market reaction.
Key Takeaways
- Revenue remained stable at €2 billion, while net income saw a sharp decline.
- Electronics sales increased by 7.9%, offsetting declines in other segments.
- Hella maintained its full-year sales guidance of €7.6-8.0 billion.
- Global headcount reduced by 5.8% as part of operational adjustments.
- Strategic wins in China and RADAR business highlight future growth potential.
Company Performance
Hella’s Q1 2025 performance showcased stable sales but a notable drop in profitability. The company’s revenue remained flat at €2 billion, but net income fell significantly to €23.9 million from €3.3 million the previous year. This decline was attributed to challenges in certain business segments and increased operational costs. Despite the net income drop, Hella’s electronics segment showed robust growth, increasing sales by 7.9%.
Financial Highlights
- Revenue: €2 billion (unchanged year-on-year)
- Operating income margin: 5.5% (nearly unchanged)
- Net income: €23.9 million (down from €3.3 million)
- Net cash flow: -€61 million (compared to -€50 million last year)
Outlook & Guidance
Hella reiterated its full-year sales guidance of €7.6-8.0 billion and an operating income margin target of 5.3-6%. The company expects Q2 margins to improve compared to Q1, supported by strategic initiatives and cost reduction efforts. Hella is also targeting a net cash flow of at least €100 million for the year. InvestingPro data shows analysts forecast 4% revenue growth for FY2025, with the company maintaining strong cash positions exceeding its debt obligations.
Executive Commentary
CEO Bernard Schafer Badhut stated, "Overall, a solid start into the year according to our plan." He emphasized the company’s efforts to work closely with customers and suppliers to mitigate risks and reduce costs month by month.
Risks and Challenges
- Supply chain disruptions could impact production and costs.
- Tariff impacts, particularly from China to the US, pose a potential risk.
- Market challenges in special applications, agriculture, and construction sectors.
- Regional performance variations could affect overall growth.
- Headcount reductions may impact operational efficiency.
Hella’s Q1 2025 results reflect a company navigating through mixed performance with a strategic focus on maintaining stable revenue and improving profitability through operational adjustments and strategic wins.
Full transcript - Hella KGaA Hueck & Co (HLE) Q1 2025:
Moderator/Operator: Good morning, ladies and gentlemen, and welcome to the Hella Investor Call on the results for the first quarter of fiscal year twenty twenty five. This call will be hosted by Berna Cheffer Bartholt, the CEO and Philip Minnie, the CFO of Haller. At this time, all participants have been placed on a listen only mode. The floor will be open for questions following the presentation. Let me now turn the floor over to your host, Bernard Schafer Badhut.
Bernard Schafer Badhut, CEO, Hella: Yes. Very warm welcome. Good morning from my side. I’m sitting here together with Philippe, our CFO, and we will present you our first quarter twenty twenty five results. We have prepared the following agenda.
I will start with the key highlights on the first quarter before Philippe will then take over with more details on the financial results on the first quarter. And then I will finish with the outlook and the key takeaways. So first quarter in our view was solid in within our internal plan. So we finalized with a sales level of around 2,000,000,000, more or less on a similar level in comparison to prior year. A very different development in the different in our business groups.
So lighting was down by 5.7%. No surprise for us because as I mentioned also in previous calls, this quarter was very much impacted by large discontinuation of a serious project, which impacted especially the regions in The Americas and Asia. Positively, electronics was quite strong again. So it’s now the third consecutive quarter that we are showing a good growth momentum driven by some areas like the RADAR business, to mention one. So a growth of 8.9%.
This is an outperformance to the market of 7.5 and in line also with our internal expectations. Life cycle solution is also down by 8.7%. Here, we have a very different development in the different businesses of our life cycle solutions. So aftermarket is stable in comparison to prior year. The independent aftermarket was even growing.
Workshop products was down. But overall, aftermarket was stable and the negative impact comes out of our special application business, which in comparison to prior year, where the first quarter was still with a very strong growth momentum in our different customer segments and there especially for agriculture and our construction business. Here, because of the very negative sentiment and growth momentum in these sectors, the sales development was significantly down. So year on year, special application was around minus 25%. So what we now see in this market is a stabilization.
So we already have seen that in the fourth quarter that we are it is stabilizing at a low level. And we expect that it should improve in the following quarters in special application, especially in comparison now to this very low first quarter. In terms of our results, so the operating income is at 5.5%, very close to prior year. Electronics had a lower gross profit, but this was also because of an one off effect we had in the first quarter with the impairment of some assets related to a program for one of our customers, which is related to electrified cars, where the volumes are much lower and have now even dropped further in the first quarter. And this was an amount of around EUR 11,000,000, which is also in our results.
Overall, what we continue to see is a good trend in terms of our cost reductions. And this supported overall our results we could achieve. Net cash flow is, as expected on the first quarter, very comparable also to last year. We see an increase in our funds from operation, a slow increase in working capital. The factoring is at lower variation in comparison to prior year.
So we expect here also on our half year results that we will turn the net cash flow to a positive number. The order intake momentum was good in the first quarter of the year. So we show here some of our highlights, only to mention single ones in lighting. I think very positively, we could win important strategic projects with different Chinese OEMs, which shows the ability also to be competitive in such an important growth market for us. In electronics, I would like to highlight two very important programs for us.
The first one is significant program for our new intelligent power distribution module. So our eFuse, where we won with an important European premium OEM, a significant program in a mid-three digit million overall order volume, which is a which was a very important strategic program also for our area of body. Additionally, I want to highlight again a strong order intake we won for our RADAR business with an SOP of twenty twenty seven. On life cycle, we also were quite successful in our initiatives to grow further, especially in the in the truck and bus segment where we won, for us, important strategic projects as well. Looking to our structural measures, we are in line, especially on our European transformation program.
Overall, here we we highlight the decisions we have taken in first quarter and where we are in execution. So we announced the closure of our development center in Berlin, Hella Aglaia, with around 175 positions working there as of today. We are quite advanced now in the finalization of the of the negotiation with unions and workers council, and this will be executed now in the upcoming eighteen months in two different waves. So we expect to finally close this office end of twenty twenty six. Additionally, we announced the structural adjustments on life cycle solutions where here for our special application business, one of the main plants we have in Austria will be significantly adapted.
And we will relocate a significant part of this facility to Romania. And this will reduce in Austria around two twenty five positions where we will use there our facilities we have in Romania, and this should lead to a significant cost reduction impact for us also going forward. For Germany as well, and here for for Lipstadt, we’re also running voluntary program, which will be now finalized in the next weeks with around 200 positions, will further reduce. Overall, just to give you a sense, on a year on year comparison, we reduced globally already the number of headcounts by 5.8%, considering a more or less flat sales development. So it shows the efforts we have already done and what already we have realized.
And this should also now in the following quarters support our overall cost reductions and the ambition we have in improving our profit situation for this year, but as well for the next year. If we look at another aspect, the tariff mitigation. Tariffs for us have one main impact. These are the especially the tariffs on parts we are buying in China and which are imported to into The U. S.
So this is something where the overall tariff of 145% and the impact is here, especially on active electronic products, is something which has the highest effect. Overall, we calculate this with an amount which is around $30,000,000 This is something where we are in discussions also with our customers that this has to be taken over by our customers. Beside that, the tariffs related to imports from Mexico into The US or the European Union into into The U EU are overall not very significant amount, especially because the ECOTERMS are in such a kind that customers have the responsibility of importing the parts. Overall, if we look at effects related to volumes as of today, we have not seen any real impact on our volumes. So, so far, our sales development is is very stable.
But we also, for sure, cannot foresee now the development, especially now in the next months and especially on the in the second half. We would expect somehow a negative effect on volumes, which would for sure then as well impact our sales development. What we assume so far is that it should remain somehow at a level that we would remain in our range of guidance in sales, which we have given. With that, I want to hand over to Philippe for more details on the financial results.
Philippe Minnie, CFO, Hella: Yep. Hello. Good morning to all of you. So sales, we published sales at around 2,000,000,000, which are mostly stable versus q one last year. So at constant rate, the less sales are down by 0.8%, and we are benefiting from the €12,000,000 of FX impact positive versus last year.
So sales are, as I said, basically pretty strong with electronic, especially with the RADAR business, but also between lighting in Europe with some main light business. But we are suffering in in China, as it was mentioned, due to lighting and end of production and end of series, which are impacting mostly lighting in Asia. Looking at the now performance per business group. So lighting sales are down by 6.4%. Again, with with some growth, for example, in Europe with Porsche, but a strong decrease in Asia and China, mainly with end of production with the the Tesla Model Y, for example.
At the end, lighting is at 3.2% of operating margin versus 3% last year. So lighting is benefiting and has improved the material ratio, so benefiting to the gross profit. And they are also doing some cost saving to offset partly the volume drop, leading to an improved operating margin versus last year. On electronic business, here we are looking at the growth in terms of sales at 7.9% increase versus last year, mostly coming from RADA business in Europe, from TREPs in North America, but also RADA and management management system in China. So here, the operating margin is at six percent six point three last year.
And here, we have the effect, which was also mentioned from the write down of assets linked to the energy management or electrification in in Europe for the amount of 11,000,000. So this was partially offset by lower r and d and s g and a as well to go to the 6% operating margin versus the 6.3. Life cycle, so it’s down in terms of sales by 7.3%, mostly driven by special application and agricultural and construction business. On the other on the other side, we are stable or even having growth in in spare part and especially in Asia. And here, the profit operating income is at 10.8% versus 12.1 last year, where we have seen some cost savings on on on to to counter effect the the volume effect, but we still have an impact of the volume, which is leading us to the 10.8% of operating margin.
Looking at the sales per region. So in Europe, we are sales which are at 1.7% increase versus last year versus market which is at 6.7 down versus last year. We also have a growth in Americas of 8.1% versus market, which is down by 3.6. And in Asia, we are at minus 12% versus market, which is at 6.6%. But again, mostly explained as mentioned earlier by the lighting business and service project, which have which have ended up in China.
Profit and loss account. Looking at q one twenty five gross profit, we are 23.3% versus 23.7% last year. So here we have the have the effect of the volume for special application, which is impacting us. And also, again, the write down of electronic which was mentioned several times. On the r and d, we are 10.4% versus 10.7.
So here, we are reducing the r and d portion on the in in our p and l. And s g and a are mostly stable or slightly improving, 7.4 versus 7.5, and even improving more on the admin side going from 3.8 to 3.5% with a decrease of 6,000,000 on admin costs. So showing already here the reduction in terms of fixed cost and the benefit of the measure which have been taken. So operating income at the end is at 5.5% versus 5.6. EBIT is at 2.5 versus 5%.
So here, we have the effect of the restructuring cost, which have been booked. You see 52,800,000.0 versus 5.6 in nonrecurring, which is mostly the booking of the all the merger which have been already announced in Q1. And we are ending up with a net income at 23,900,000.0, 1 point 2 percent versus 3.3% last year. Looking at the cash. So net cash flow, we are at minus 61,000,000 versus 50 minus 50 1 last year.
So here we have less contribution of the factoring variation. So we have a 14,000,000 impact versus 48,000,000 in q one twenty four. And we have a small increase on the the working capital as well impacting the cash, and we have a slight increase of the restructuring cash out also in q one versus q one twenty four. On the CapEx, we are starting to see the reduction. So it’s tangible CapEx.
So we are at 135 versus $1.50 last year, which is in terms of sales lower also than what was spent last year. We are at 6.7 versus 7.5. So here we start to see the benefit also of the standardization and automatization and the the more frugality on the spent in terms of CapEx.
Bernard Schafer Badhut, CEO, Hella: Good. Coming to the to the outlook, so we we confirm our outlook for the for the full year. So sales being between around 7.6 and 8,000,000,000, the operating income margin being between 5.36% and the net cash flow of at least hundred million. With the comments I made on the tariffs, which with the tariffs which are in place as of today, we still assume that we should be within these these ranges we are we are confirming today. So key takeaways.
Overall, a solid start into into the year according to to our plan. We have initiated additional cost reduction measures, which should mitigate the risk of a reduction on sales volume, especially for the second half of this year, but also to prepare ourselves for an even less cost run rate also into 2026. On the tariff side, so internally, have we have task forces implemented in all in all regions, and we are working intensively with our customers, but also with the on the full value chain, also with our suppliers to mitigate the risk as much as possible. On the outlook, we confirm the outlook. And looking also into the second quarter, what I can say is that we had a solid month of April, which was absolutely in line with our expectations.
And we assume until June that we should see the profit margin improving from Q1 in comparison to Q1 results. And as I said, we would expect net cash flow to turn positive on the full six month half year period. So that’s all from our side and happy to take all your questions you should have.
Moderator/Operator: Have. And the first question comes from Christoph Daszcari, Deutsche Bank. Please go ahead with your question.
Christoph Daszcari, Analyst, Deutsche Bank: The first one would be a bit also following up to your comments that you just made on the Q2. It looks like you have been up outperforming in Europe and Americas in Q1 quite strongly. Was there any sort of preproduction that you saw in those regions potentially driving that? Or as you said, April looks relatively stable versus Q1, should we continue to see that outperformance coming through also in the second quarter? And then you highlighted, obviously, the exposure to goods from China into The U.
S. In terms of costs. Is there any disruption supply chain as well? Or do you see longer waiting times at customs or anything of that regard? If you could comment, would be appreciated.
And then just the last question on the semi cost, Have they been already a tailwind in Q1? Could you quantify that? And again, what do you expect for the full year?
Bernard Schafer Badhut, CEO, Hella: So what on on q two sales, so what we what we see is a continuous good momentum in electronics. So there, it’s it’s every time not easy to to quantify exactly what would be then our outperformance because then we also have to we have to we would have to need visibility on on on all programs globally. But what we can say is that on our programs and on our sales expectation, especially on electronics, there is a good momentum. So this is continuing. We do not expect a very significant change in in lighting.
So some of our important new programs are now in the in the ramp up phase, but we should continue to see still a difficult sales development for for lighting in comparison now to the to the market. On the on on disruptions on the on the supply chain, there is no effect yet. So but we we we see the risk. So this is why we are intensively working together as well with with all our with with the selected suppliers we we see as a risk, which are apparently the ones which are mostly in in in Asia. But as of now, no issue no issue on that on that one.
On the semi costs, so there is no big change, let’s see let’s say. Now so what what we have, as as I said, especially for the PCBAs on our side, additional tariffs on the PCBAs, we we are buying we’re still buying in China. So there, are working on together also with the supply chain to find ways and and to move more outside outside China. What we have to a larger extent already done in the last in the last years. But this is something which where we try now really to reduce on the cost side.
Other than that, on the cost overall, so what we have now been able to negotiate is a certain price decrease now on the semis in comparison now to prior year, which should support also electronics business now going forward. But we are still on a a level which on some of our parts is is still higher in comparison to before before the pandemic.
Christoph Daszcari, Analyst, Deutsche Bank: Thank you.
Moderator/Operator: And the next question comes from Sanjay Bhagwani, Citi. Please go ahead with your question.
Sanjay Bhagwani, Analyst, Citi: Hi. Thank you for taking my question also. Three questions from my side. The first one is on I think you already alluded that the sequentially, the Q2 margins are likely to be better. Can you maybe walk us through what the key drivers are?
Is it does the material cost or cost savings? Or there is also an element of incremental organic growth outperformance? That’s my first question, and I’ll just follow-up with the next one after this one, if that is okay.
Bernard Schafer Badhut, CEO, Hella: So it’s it’s there are different elements. We we do not expect that there is a there is more outperformance or the sales momentum is even higher. So it’s it’s more on the cost side. So we we see that month by month, we are able really that to reduce our cost and the impact of our cost saving measures is increasing. As well the on the material side, we see with the negotiations, which we were able to finalize on the material side.
So normally, if you have new prices and the way now it’s more now on the accounting side, still we have the average price. So that step by step, if you have a decrease with the average price evolution, you see over the coming months that there is a positive impact then on the material cost ratio. And this is month by month improving. So there is also effects coming out of an improved material cost ratio. And the other third element is that we also expect from commercial settlements, where we expect a more positive effect in the second quarter in comparison to the first quarter.
Sanjay Bhagwani, Analyst, Citi: Thank you. And then maybe I think you already mentioned, so the H2 margin is better than H1. Is this an element of, again, the costs? Is that fair to say?
Bernard Schafer Badhut, CEO, Hella: I I have not really said something to to h two. So I said I said q two, you know, will be will be better than q one. So h two, I think what I said is that still there is the uncertainty on the volume.
Sanjay Bhagwani, Analyst, Citi: I see.
Bernard Schafer Badhut, CEO, Hella: Yeah. So what what I said is that I’m confident even with all tariff measures they are and also with the risk there is on volumes going down perhaps, especially for for The US, impacted by the tariffs, so that we should remain within our sales range. And that the cost reductions and what we are now doing to mitigate this effect, this should certainly also lead to the fact that we are also confident to remain in our operating income margin also, we have guided. So but I have not now and that is very difficult to predict what would be then exactly our OI margin on H2.
Sanjay Bhagwani, Analyst, Citi: Thank you. That is very helpful. And and and the second one is on the material costs. I think could you please highlight what materials these are? I think electronics is you already mentioned, But but are there any other materials as well?
So the reason for asking this question is also because what’s kind of bigger part of the fovea where there is a gross, like, material cost synergies, if there is any more color on that.
Bernard Schafer Badhut, CEO, Hella: So in general, I can say that for all all material groups, we see we see improvements. So we have we have plastic parts. We have metal parts. We we also have services. So this is nonmaterial.
But overall, we reached we reached quite a a good a good reduction. So what we reach gross is around 5% overall overall commodities. Then for sure, you know, there is a part where we also have commitments to our customers. You know? So on price reductions, as you know, the LTAs, which are contractually committed for the different programs, which net so which gross are also in an amount of around 3%.
So but if you take the net, so there is an improvement of around 2% we reach in comparison to to last year.
Sanjay Bhagwani, Analyst, Citi: Thank you. And and my final one is on the tariff impact. I think the I think the key element you mentioned is it is the electronics that travel from China to the to The US. And Yes. About about others, is it is it largely because from from Mexico to The US, the parts that you supply are USMCA, and maybe from the Europe to US, there is not much exposure?
Or there is also an element of, like, the recently announced exemptions which can mitigate some some of these risks, which which would have been before before the mitigation like these exemption announcements?
Bernard Schafer Badhut, CEO, Hella: So for us, the main point is that our contractual obligate obligation is basically that we deliver Xworks. So so that the customer is in charge. If there is a tariff to pay, this is on this is a customer this is on the customer side. This is one thing. But the other thing as well is that to a very large extent, so I can say around 85%, our products are USMCA compliant.
So this is something where also we are intensively working on also on also on working on the part which is not USMCA compliant, but also to make it compliant that our customer has also not to to take any any tariff tariff risk overall. But these are the main reasons.
Sanjay Bhagwani, Analyst, Citi: Thank you. As always, very helpful.
Bernard Schafer Badhut, CEO, Hella: Thank you very much. At
Moderator/Operator: the moment, there seem to be no further And we have one more question coming from Akshay Kaka, JPMorgan. Go ahead with your question.
Akshay Kaka, Analyst, JPMorgan: Morning, Mr. Sheikh Abhatul, Akshay from JPMorgan. I have a couple of questions, please. The first one on China. Could you remind us on the performance of the business across business divisions in Q1 specifically?
And how do you expect that performance to evolve throughout the rest of year, please? So just mainly talking about Lighting and Electronics in China, please. That’s the first question. And the second question is on the North American business. I completely understand that we have an exemption for USMCA compliant products in the near term, and we do have a rolling relief, which lasts for the next two years.
But it looks like the administration basically wants more local US capacity, and we have heard from a lot of US OEMs during this earnings call that eventually they will be talking to suppliers to increase their local US supply. Could you talk about what are your what have your discussions been with your customers in terms of the medium term structural changes that you might have to make to the business in North America, please? Thank you.
Bernard Schafer Badhut, CEO, Hella: Thank you, Akshat, for for your questions. So on on China, we had a very diff different development. So on electronics, we had we had a decent growth, which was above 10% in the first quarter, which was very promising, and we we expect to continue to grow in in the electronics. For China, we had a we had a significant reduction, which was largely above 20%. This was because of two or three reasons.
One one was that we mentioned, one, a change in product. So there was a discontinuation of a of a very large program for us in China. This was one reason in comparison to prior year. The second the second reason was that some of the programs were developing slower than than expected, and the third the third reasons were some delays in in ramp ups, especially for Chinese Chinese OEM programs. So this this were the major reasons.
So for for for lighting, we expect that that this very very negative momentum, you know, so this this should improve now over the over the quarters with with the new ramp ups, which are which are now which are now ongoing, but we do not expect overall for lighting to grow this year in comparison to electronics where we will where we will grow. On the on your on your second question, so we are we are as well in discussions with our customers. There is there is very, let’s say, different customer interests. I I would put it like that. Also, depending on the on the different programs, Some some of our customers are interested in at least having the option.
How would we which option we could offer if they would like us to produce in the in The US? And there are others who who still are not really interested that we move we move towards towards The US. So it it depends also where their production location is, and it depends also on the on the customer. So for us, for electronics, as you know, we we have production facility in in in electronics in the in The US. So there, we are flexible to to offer also out of of of the The US, you know, if if this is this is something which customers would like.
So we are we are discussing now, as I said, both options. For lighting, we are doing that as well. But as you know, we we do not have any lighting facility today in The US. What we are envisaging and these are options we have proposed is that within the overall for via production network, there are options for us to move into The US if if that would be needed, and this is something for lighting we are discussing, if if that would be something from interest for for our customers. But I I can I can confirm that this is something all OEMs now in the programs we are negotiating are discussing with us, and we are looking, as I said, for all different options that mostly no decisions are taken yet?
Akshay Kaka, Analyst, JPMorgan: Is the Thank you.
Moderator/Operator: And as there are no further questions from the audience, I hand back for closing remarks.
Bernard Schafer Badhut, CEO, Hella: So I want to thank you for joining this call and for the interest you are showing to to Hella again. And thank you for your for your questions. I wish you a pleasant remaining day, and hear you. See you hopefully soon. Bye bye.
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