Concentra Group Holdings Parent, Inc. Price & Performance (CON)

And with this, let me now hand you over to Niko. Yes. Welcome from my side. 2024 was a year characterized by a challenged top line on one hand. On the other hand, progress on the bottom line, which is even more important part from where we are coming from. We see sales growth to that 6% down organically in persistent weak markets on the automotive side, but well in particular second half On the industry side, for Contitec, this challenging market, we've been able to increase EBIT So SEK 170,000,000 absolute terms on top or EUR 7 return on sales from 6.1 So 22.2, we have been at five point zero. By the way, just to remind, 6.1. Now we are at 6.8. So substantially improved mainly by the measures which we implemented as I said because we haven't seen particularly on Automotive and ContiTech any good tailwind So on Automotive, we progressed with our pricing So 2024 negotiations finalized with a high share of sustainable agreements. I come to this then on the Automotive Group from plan. And the self-service measures are fully on track [indiscernible] €400,000,000 for this year already Safeguard, so we have more than 200,000,000 last year, which gets us on track.

And as I said, I come to those measures. Then later, tires ended with again solid performance, which we have seen as well in the quarters before. Healthy winter tire business helped and the PO2 replacement markets sell in has been better than we've seen them before, particularly than the the end as well on The U. S. Side. We could see better PLT markets. And Tractor finally stabilized, yes, on a lower level. Was, but stabilization is seen first of all, as positive. And in ContiTech, both markets before down persistently down, waiting on the performance so full focus on street cost discipline. And measures which we've introduced. So you see the 7.8% margin in Q4 We had a solid Q4 and leading us then into 2025, and we already announced further measures on the ContiTech side. So this led us well in an [indiscernible] [indiscernible] on the next slide as well, this has been burned [indiscernible] one off such as tax efforts for the spin off preparations with dividends within the group, which led to non cash effective tax expenses around €100,000,000 So if you add those, we would be well on the near side €110,000,000 up versus prior year.

So which lets us then on the ROE to 11.4 So given that 10% is our work or threshold to generate value, we have generated in 2024. Again, value so slim by 1.4%. But we generate this. And looking on the adjusted free cash flow, have been at the upper or slightly above the guidance which we had going into Q4 that was driven by a positive improvement, substantial positive improvement on the oil and motor side, [indiscernible] [indiscernible] this is even stronger given the fact that we had negative impacts by one offs. So finally, last line, you see that this drove as well our net indebtedness down from about SEK 4,000,000,000 to SEK 3,700,000,000.0. So SEK 3,000,000 we've been able to deleverage on the debt side. Net debt side, So that translate into our dividend proposal. So you see we foresee [indiscernible] than the year before, positive free cash flow development for the full year, decrease in net debt we have achieved on a group level our financial results, annual results, which we are giving. So we have all reasons to let the shareholders as well participate in the positive development, which we've seen in 2024. If you now from our net income [indiscernible] [indiscernible] you end at slightly below 40%.

So we are with that within the corridor on the upper end. As we have been in the last years as well. However, the positive development, we strongly believe that this is the right decision leads us well to a 4% dividend yield overall, which seems to be from our point as well. Reasonable. So looking now as I mentioned, into Automotive, I mentioned before, it was a clearly challenged top line. However, we made strong progress on our self self measures, which are leading as well into 2025, as the price negotiations, number one, So much higher sustainability price agreements than we had last year getting into the first quarter. That makes us go with confidence as well into Q1 twenty twenty five, much higher Continental. Than we had last year and for this year, side effect that there are still some pricing to close. We are focusing on redesign to cost activities in order to really manage our BOM and generate further cost savings. Order to improve the bottom line. Operational excellence year on year inventory, we had three our inventory by SEK $255,000,000 that supported the free cash flow of 2024 and as well for this year not at the end, we continue our inventory reduction and we are targeting return rate increase by one year over year.

Coming to the strong progress, our SG and A measures, which we have Continental, a greater SEK 200,000,000 are effective in 2024 already All agreements are in place It's just for the execution of the rest, which is still open now to achieve the €400,000,000 And as we already that far, we're investigating further potential given the market environment, which I said, which is still not providing tailwind particular for Europe. And for North America. On the R and D side, EUR 200,000,000 overall improvement in absolute terms, In those €200,000,000 it's important that €150,000,000 are restructuring expenses, which we take out, so to say, in absolute numbers, you just see 50 but the restructuring costs are showing here as one offs. If you take those out, we had €200,000,000 down.

Gets our net R and D rate from 11.8% last year to 11.4%. So as well relative, so our top line was that much stressed We improved on our R and D [indiscernible] just to give again 2022, we have been at 12.4%, so one percentage point which we improved. In particular, Q4, we reached an 8.5% net R and D Even though the reimbursements have been lower than the year before, strong improvement. Here, As we have announced, we have the targets to get below 10% in 2027, And with the current in market environment, we took the decision to reduce our R and D headcount by additional 3,000 until end twenty twenty six, It should, on the one hand, increase our efficiency and clearly our cost base On the other hand, as we mentioned, our R and D initiatives by consolidating R and D hubs, by bringing the project teams together by optimizing our footprint, which is relatively fragmented still of today we are fully convinced that this will even increase our effectiveness for stronger R and D output by reduced input in terms of cost. So last but not least, as mentioned, the SEK $255,000,000 on the inventory reduction helped, but overall, we have achieved as well [indiscernible] positive cash flow and this cash flow on automotive is without tax and interest paying this on a group level.

So you see about $3.50 positive. This is a turnaround and we expect this going further as it is from utmost importance to establish a capital market ready company for automotive for the spin off which is planned for the second half of the year. Looking into Contitec, as well burdened in this case by the double dip. So auto weak as we have seen in auto, but as well the industry markets, particularly in the second half in Q3, have been quite weak. So strong focus on sell side measures here as well. So for our OASL, business area, which is heavily exposed to auto, we have successfully worked on pricing parts last year, which we completed as well as self help measures which has driven 400 basis points into positive territory of profitability and we have contributed with positive cash flow [indiscernible] So we continue our measures. We have further initiated measures for variable and for variable in particular, bill of materials, standardization, harmonization. So we've given clear targets of the team, central team is steering this, and we target EUR 50,000,000 variable cost reduction program and this is on top of the programs which we have anyhow by improvement measures implemented.

So this is a major activity driving forward in order to improve and secure results. On the fixed cost reduction, you could see Focus 2025 that we took again January measures on the footprint So we have announced plant loaders five additional sites in January. Germany, over five eighty headcounts. So those are closures and rightsizing and I said, particularly the rightsizing part and particular on the German side. So last but not least, complexity reduction OES LCARVARD is on track. We are progressing and market sounding takes place as we speak. As we said in the first quarter, are moving forward and progress is melt. With that, I hand over for the detailed results To what Thank you, Niko. Yes, if you look at Page seven, and we look at the quarterly development you can see two overarching trends. As Niko said, sales remained under pressure [indiscernible] being able to grow organically at 2.6% at the same time though we managed to increase our profitability in each sector in Q4. Relative and in absolute terms, that means our strategic focus on value creation pays off. Now let's go more into details with each sector. Start with Automotive on Page eight.

As I mentioned, we had to face organically declining sales of minus 3.2% so basically in line with the market. But the picture was very differentiated per business area, as you can see. Architecture, networking, developed VELVUS 7% organic growth benefiting from customer mix and slightly positive effects. From new product launches in 2024. SAM and UX continue to be burned from lower than expected take rates of our products in regions as well as delayed launches of new platforms. The customer mix in the market markets was not in favor of our product [indiscernible] in UX, These effects also had a significant impact on profitability by some in managing [indiscernible] Nevertheless, we were able to improve our adjusted EBIT by €75,000,000 This was mainly due to cost saving programs, self help measures, which overcompensated for the lower volume We realized savings in both SFG and A as well as in R and D. This is particularly worth mentioning since our R and D reimbursements came in slightly below the level of Q4 twenty twenty three. With the 6.6% margin in Q4 we realized an adjusted EBIT margin of 2.3% for the full year. This is marginally below the low end of our target.

We have set ourselves for the full year [indiscernible] if you took if we look at the sales headwind we faced throughout the year, I think we can actually be proud of the achievements of the automotive organization. Now If we Look at the breakdown of the sales on Slide nine, you can see the familiar picture. Of the previous quarters. While we performed well in Europe, outperforming the market by 4%, we lost to the markets both in North America and China, again, this was attributable unfavorable customer mix phasing out products lower take rates, All this resulted in the worldwide sales performance in line with the sales weighted market for the quarter. Also for the full year, we came in just in line with our weighted market. With Page 10, order intake, even though a lot of sourcing decisions of our customers have been pushed out into this year. So 2025, we came in at a book to bill ratio of one For the single quarter, this means an order intake of €5,100,000,000 which Safety and Motion realized almost half of it. A good portion of that came from our latest generation of brake systems. I think this is a good message that we're continuing to win all this with our MKC2 brake systems and our trust in our leading technology and capabilities for OneBox Solutions also in Asia. [indiscernible] to the order intake mainly with awards for body and zone controllers as well as for passive start and entry applications.

Now let's continue and look at tires. Even though the comparison base was quite solid, tires managed to outperform Q4 of twenty twenty three, we realized sales of €3,700,000,000 is corresponding to 2.6% organic growth. Within this, both volume and price mix were positive. On the volume side, we benefited from overall good replacement markets, particular from a healthy winter tire seasons in Europe and also on the European truck side, we saw at least this stabilization in volume. In terms of pricemix, the muted OE volumes combined with good replacement market contributed to a good channel and product mix. And as you know, good replacement business is also margin accretive, which you can see in the 13.9% adjusted EBIT margin that we realized in Q4 for Tyres. And this was predominantly driven by European replacement volumes and a good mix effect from ultra high performance and winter tires growth. But also in APAC, we saw a good sales environment. This helped us to overcompensate the negative material costs we faced in Q4 as well as the ongoing negative year over year effects [indiscernible] [indiscernible] On the next page, we actually want to provide some additional information around the status quo of our tire business.

If you look at the channel mix, you can see that the replacement markets which make up around 80% of our sales in 2024, is by far the most important revenue contributor Region by region does differs a bit, but the main message stays the same. The EPIC region which is certainly also attributable to some purchasing incentives, tested largest OE shares 27% of sales, while Our main market Europe only has 15%. U. E. Share. Segment wise, Passenger Car Tires with more than three quarters of overall sales clearly make up for the largest portion of our revenues and if you look at the percentage of premium tires which means Continental branded tires in our portfolio, it also stands at 77%. Out of these 60% ultra high performance tires, which is an increase of 300 basis points compared to last year. And if you only look at the share of sales of our passenger car tires, excluding van, we even reached a share of 66% in [indiscernible] Now let's look at ContiTech. As you saw at the beginning of the presentation, Continental deals declining revenues [indiscernible] on the back of weekend markets in both industry and automotive, we lost more than €100,000,000 of sales, which equals an organic decline of 5%.

Particularly the Off Highway and Commercial Vehicle markets Continental to burn our sales volume, whereas we saw some stabilization in the construction and home market. While aftermarket performed well. In that environment, sales have became even more important and you can see in our results that we were able to execute the necessary measures as a result of the strong stronger quarter came in at the upper corridor of the profitability guides we issued with the Q3 reporting. An important contributor was the ongoing improvement of our original Solutions business UESL came in not only an EBIT positive, but also casual positive in 2024. And we are also continuing making good progress of the carve out of that business. And starting the M and A process. Now on Page 14, let's look at cash flow. Looking at operating cash flow, you can clearly identify improved earnings as well as continuous inventory management, of the key levers, They helped us to compensate one offs such as reacquisition of of shares in Contitec AG. We mentioned that before. The beginning of the year as well as costs for both restructuring and carve out measures, in Automotive and QuantiTech. On the positive side, is all low to mid triple digit million euros cash inflow from changes in working capital more precisely in receivables in our contract manufacturing business.

On the investing side, we were very disciplined regarding CapEx. CapEx mainly because of the high market uncertainty delayed product launches as well as efficiency measures That wraps up my Q4 Now let's look at 2025, starting with Page 15. Beginning with our expectations for enrolled wide light vehicle production, we're currently expecting that the existing trends of last year will continue. We are seeing Europe down 3% to 5% and North America also down at the lower single digits. We expect a slightly positive development in China expecting worldwide light vehicle production to be flat overall, but with a continued negative [indiscernible] For commercial vehicle production though, we could see slight increases on the very weak comparison of 2024. The replacement tire side, we are currently expecting slight growth potential in all major markets leading to an expected 0% to 2% growth rate worldwide overall in passenger car tires it is also quite in line with our expectations for the commercial vehicle replacement markets. If we look at the industrial production, then we expect China to remain the growth driver of the industry by Europe and North America, could be flat or slightly [indiscernible] let's look at our 2025 guidance in this challenging environment.

For the group overall, we're expecting revenues of around €38,000,000,000 to €41,000,000,000 at an adjusted EBIT margin. Of 6.5% to 7.5% and adjusted free cash flow 800 to hundred million euros to €1,200,000,000 This includes CapEx of around 6% of sales. Looking at the sectors, we're currently expecting the automotive sales to remain under pressure to come in between 18 to €20,000,000,000 at an adjusted EBIT margin of 2.5% to 4%. That means we will see further improvements on the back of our sales efforts despite the very challenging sales dynamics. For tires, we're expecting to come in between 13.5% and €14,500,000 sales at an adjusted EBIT margin of 13.3% to 14.3% Given we are facing a lot of uncertainties in 2025, combined with a headwind on the raw material side. For Conject, we are currently anticipating sales between $6,300,000 and €6,800,000,000 adjusted EBIT margin ranging between 67%. On that manufacturing, we are phasing out and we will continue so it will continue to decline in 2025. Sales will presumably be between 102 hundred million euros at a zero margin as planned. To make the bridge from adjusted EBIT to net income, we're expecting PPA amortization of around minus €100,000,000 as in the prior year, well as special effects of around minus €700,000,000 They will mainly be driven by restructuring on the one hand and spin off effects roughly the same magnitude.

The financial result once should once more come in at minus EUR150 million despite the lower level of net debt. Since we will have to pay slightly higher interest in the current environment, The tax rate finally is expected to normalize again and will be around 27%. Please keep in mind that both our market outlook and our guidance do not include any potential significant changes to global tariffs. Maybe final statement from my side before I hand back to Max. We are on track with the spin off preparations. We have achieved so far all milestones that we have set ourselves. And the plan is to go to the AGM enable Efthand Capital Market Days, mid of the year and then execute the spin in the second half of this year, everything on track as planned. And with that, I hand back to Max. Yes. And I would like to hand the rest of the time to you guys. So operator, Whitfield, please open the line for Q and A?

Thank you very much. Yes, dear ladies and gentlemen, the Q Q and A line is now open. So please press 9 and then the star key. I repeat, the combination is 9 and the stocky. So the first question comes from Michael Espinel of Jefferies. Over to you. Thanks, Kite, Nikolai, Lef and Max.

Just two for me. [indiscernible] Just from a tariff perspective, obviously, you mentioned that your guidance is in the absence of tariffs. Can you give us some kind of idea of what the impact might be given the tariff announcement overnight?

Still to be quantified So we have a high localization. We have a smaller plant in Mexico and SAP, which is serving the local market. But there as well some goods coming to U. S. So now we are optimizing supply chains, talk to customers, how to manage the situation and once we know more then we will inform on that. Our we can say we are relatively local and not overexposed there.

Okay. And just a follow-up on tariffs then. From a logistical perspective, from what you see on kind of the border in Mexico and in your internal process is a tariff able to be implemented from today? Like, will the people at the borders have the capability to take paperwork and payments and everything for tariffs?

I can only say we are ready. How much that will influence then the procedure at the tariff border, we are not able to judge. But we assume this is not coming completely as a surprise, enough procedures there in order to handle that. We are ready for this. So we have to assume that this works as well.

Okay, great. And then last one for me. I think you've made some comments before that margin should structurally grow in tires. Your 25% guidance at the midpoint is for margins to be roughly flat on $24,000,000 Is there something holding back margins in tires this year? Or put another way, what do we need to see to start moving towards those midterm targets?

It's a good question. So we could already see in the second half and in particular in the fourth quarter then raw materials and certain cost input products have increased This is what we have to balance with volume, pricemix and our performances. For this year, depending how the markets will react. So it's still relatively early for the year. Set the guidance as it is and we develop from here are hopeful so far Q1 started okay. That's what we saw. We know as well at March not again Eastern, is in March now it's different than last year. So we should have a solid March, which has started right now, so that we assume that we have a better Q1 than last year. Last year was Q1 the weakest quarter. We assume now that we have a better quarter than last year and then we go from there. And if we have opportunity to be better, please trust us. We are fighting for this and we will pursue doing that.

Okay, great. Thanks for your time and sorry for the disruption.

Thank you very much. The next question comes from Christophe Vasquez of Deutsche Bank.

Over to Good afternoon. Thank you for taking my questions as well. The first one actually sticking with tires and the top line guide. At midpoint, it seems like very modest growth is factored in. If I understood it correctly, you expect volumes to be positive price mix to be positive and just at current spot FX should be a positive as well. Could you just provide a bit more detail around how you would see those buckets trending in 2025 overall. And then second question on the auto free cash flow, it's good to see that it was positive quite decently positive in 2024. Could you give us any indication on '25 excluding all the one time cash outs that you would face Is the run rate set to Continental? Or are there any deviations from that? Thank you. Yeah. For the first one on the top line, you get a little bit the similar answer. As I just mentioned before, you're right. We assume positive volume development this year, not on the [indiscernible] as S and P in particular for our sales weights [indiscernible] [indiscernible] one part of our business, which would translate them for the whole sector in a certain volume and then as well in a positive mix as most of the mix comes from that part.

How much remains still to be seen as that we are for Q1 being better than last year and we are positive as well that we achieved those volumes as well as pricemix increases. How much that's remains to be seen? That's why we have a guidance as well with the upper corridor if we are better It's too early to judge. Maybe not, actually. For the second question, For us, it was important that automotive that automotive improved its margin in 2025, also achieved a positive cash flow in twenty twenty five twenty twenty four, sorry, And both the next step will be further margin improvement. 2025. And also here, we are starting Esser in Q1, and we will let's say, achieve we hope to achieve positive territory already in Q1. And for the cash flow, it will further improve in 2025. But we cannot give more details at this stage. And just one last one as it wasn't really discussed too much on the breaking issue with BMW. It wasn't very part of the comments. So I assume everything remains as we stated in previous quarters as well. No changes to the provisions or how you assess the situation.

No changes to the provisions Recall is going on. Software update is functioning. And the provision that we have built in the middle 2 digit million euros area is is still the right provision that we have built for the full year. 2024. Thank you.

And everything else we discuss with our customer.

Thank you very much. Next question is from Jose Assamendi of JPMorgan.

Thank you very much. A few questions please. Can you comment a bit on the margin evolution should expect for the Automotive division? Q1, Q2 looks like a challenging start of the year when it comes to production, but you also have the cost savings you're booking and the efficiency plans you're booking on a year on year basis. If you could just comment whether the first quarter Should we better than last year or not? And then it will be one of the efficiency measures that you're expecting? The second question, regards also with on the Alto division. Nikos, if you can comment maybe on some of business wins you had [indiscernible] A and N or autonomous mobility, anything that you you would stand out? Any big large business wins in the second half of 'twenty four? And then question three will be On Contitec, we'll love to hear a bit more what's holding back to March in And what can you do structurally to improve the profitability of the division? Thank you.

So for Q1, Q2 auto, would have already referred. I mean, honestly, we had relatively weak first quarter start into last year.

So and as Ola said, we are targeting to get into positive territory in the first quarter, how much and far remains to be seen? As said, Markus, still the highest auto month in front of us so far we are within what we could see for the start. You're right that light vehicle production for us will be slow in the first quarter, in particular sales weighted where we are.

However, we have on one hand the sales help measures, which you mentioned they're coming then as they increased stagger over last year. They help us as well in a year over year comparison and don't forget the pricing. So we have a very high level of sustainable pricing. We had our weakness last year getting into the year. Means weakness? We have later on caught up on that part, but in the first quarter, we've had many of those agreements on purpose not signed. So that helps the improvement On the second quarter, some of that is already mitigated. We had already some pricing last year. And the fixed cost measures which we had were then ramping as well up. So the incremental on the second quarter should be much, much lower if there are any, but too early to judge. First quarter, strong improvement versus last year. With our target to be the positive territory side.

On order intake we can say in the fourth quarter and Olaf has already mentioned, we've been extremely pleased with the Safe and safety and motion order intake and in particular with MKMC2. Is the braking system we are supplying as well to BMW. As you know, we have from the 2,400,000,000.0 this brake system has been $800,000,000 intake in January, which is very, very solid and strong in particular as well from Asian players. Gives us the confirmation order intake is on track. Customers appreciate our break performance and our strong technology leading technology, which we have in there. That's to me the main highlight October, you have seen we have been roughly on one.

And the rest has been more typical business like, airbag AC was where we have a relatively strong positioning in, which helped us and we see as well on the zone controller part So more high performance compute architecture, which is getting in where we are going more from the decentral part as well to the central part beat high performance compute more than the distribution architecture like a zone controllers. Those have been the highlights here. On the Contitec, We have I would say, three parts in here. The one part is OESL. Have improved by 400 last year, but still it's a low single digit return on sales number, which weighs on the overall result, which we have on the contact side. If we look for the pure industry business, still north of double digit. And plan as well to continue this. So the markets are clearly under pressure. Our Surface Solutions part, which has as well half of its business is automotive. Has as well weak markets and the home goods market, which is somehow challenged, but it's somewhere in the middle between those two. What are we doing? On the one hand, I mentioned variable cost.

Which helps all the business areas standardization, particularly on the industry side, because this is clearly a high complexity where we see lots of opportunities to get better. Fixed cost reductions, which we are doing.

As mentioned, five plant closures or rightsizing we have announced in January So we will optimize the footprint optimization, which we have and generate savings via that. So mainly for this year, again, particularly for the first half sell through, which we continue as well for the second half. For the second half, we at least [indiscernible] for a certain industry recovery. If it doesn't come, then we continue our self help measures and prepare ourselves for a recovery then coming later.

Perfect. Thank you very much. The next question is from Horst Schneider, Bank of America. Please go ahead.

Yes, good morning. Hope you can hear me.

It's Oscar.

Perfect.

The first question that I have is related to Contitec.

So since I think your guide is not yet including the disposal, could you maybe say how the guidance would look like if you were now disposing this Kotitek Automotive business in the quarter of H1, in that context also maybe you can provide an update where you stand now on the disposal? That's question number one. Question number two is on on automotive again. Because your guidance, the lower end implies something like 10% revenue decline. And I wonder basically what needs to come true that really the revenues here decline by 10% and more longer term is then also for the spin off, It seems to me that the 6% margin target that you have put out for 2025, 2026 for automotive is no longer valid. Because you are missing kind of €2,000,000,000 to €4,000,000,000 of revenues. So with that in mind, I do not think you want to revise the guidance now in this call. So therefore but nevertheless, I said in my end, what is the necessary cash equipment for automotive in the spin off? [indiscernible] OESL is still part of the guidance. However, as mentioned, we pursue and started the sales process in the first So we are in touch with potential buyers and partners.

And now starting this progress as we speak. More to come then after the first rounds and after we see that we are moving forward. On how would ContiTech look like without OASL, as we have announced, it's roughly €2,000,000,000 sales. The OSL business area. And a low single digit return on sales you can do the math. And then you can somehow calculate what ContiTech would mean without the OEI side. Niko, low single digit return on sales, I'm guessing it means something like 2%. Is that the right ballpark? 2% is a low single digit number. Yes.

Okay. Thank you. I tried. Okay. Go on. Thank you.

Excellent.

So the second part, yes, we chose on purpose a larger bandwidth on our sales because currently We see that so many moving parts on our customer base. We see our markets We heard as well today, tariffs are coming in even though they are not fully included from 2025 in this foggy situation, we rather guide on a larger base and we prepare ourselves. That is as well internally for us the signal. If the market is not in our favor and our tailwind, we have to make take actions and we have to manage our costs very, very disciplined. That is the basic message which we want to send externally, but which we will do as well internally. So if you see as well our margin guidance, take into account €18,000,000,000 as you make the math, this is a substantial deduction of sales. Which is then having effect as well on the bottom line, but by all means, by the measures which we are doing we try to prevent How we are going forward? And with regard to mid and long term, yes, We had in our Capital Markets Day in December 2023 different market situation than we have today.

On the total base and absolute base as well on customer mix. And as well as product mix. Product mix has changed again looking for certain types, which are in the regions, up in Europe, which might change again and in North America, which postponed electrification and so on. So for the next short and midterm guidance, we refer to our Capital Markets Day mid of the year.

That's where we are looking into the mid- and long term plan. We're looking as well on our margin guidance as and do this, so to say, from scratch and from the current situation and take everything into account which we saw in the last two years for the time being. As said, we are preparing for both, for upswing as well as downswing and clearly full focus is still on our cost situation In order to manage as well our capital structure, going then into this bit.

Something to add for the capital structure?

Yes, absolutely, Niko and provide automotive with a very solid which means that they will have a net cash position excluding pension and leasing liabilities. The exact amount we will announce in two calls And Continental after the spin will keep investment grade.

Small follow-up maybe for Niko. Niko, tomorrow we have got this announcement of CEO Automotive Action Plan. I'm not sure if the European Union involved you in this discussion. But from a supplier perspective, what can the European Union do in your favor within this action plan?

So we have been all the suppliers, all the window suppliers as well involved. However, as you know, this is [indiscernible] and if it comes to the fleet, CO2 measurements, we are powertrain agnostic. So we have not been at the forefront However, everything in this action plan, which improves the competitiveness of Europe and our OEMs, which we have here, you know, are somewhat overexposed to Europe, as well to the European OEMs. So everything which supports competitiveness here which supports our industry is of course as well as something positive for us.

All right.

Exactly. We have to see the retinue what is coming up and then we judge and then we come further. Absolutely, Ross. All right. Thank you.

Question is from Thomas Besson of Kepler Thank you very much. I would like to start with a question on the cash flow please. Can you share with us your assumptions for the interest restructuring and tax outflows for 2025 and compare that with 2024.

And explain why in Q4 interest and taxes looked higher than in previous quarters. For the first question, The second could you talk about the expected seasonality of group barges? I know the group is probably going to change over the course of the year.

If it stays as it is, which I think is the way you've guided for the year, would you expect a stronger second half which is what I would assume or a stronger first half.

And lastly, Is there any more granularity you would like to share with us on the timeline for expected capital market events to come. Or if not, when should we expect to get that coronary disease? You.

Maybe I start with the second one and then you or you want to start with the cash flow? You can definitely then I found it.

Expected seasonality So yes, based on our reimbursement business, which is still more heavy in the fourth quarter than as you've seen in the years before, We expect a stronger second half than the first half, [indiscernible] for our markets in particular, the industry markets which we are expecting in the second half to be more favorable than in the first half. As we have seen it last year, Not that strong in the seasonality because you heard us saying that we assume automotive in the first quarter to be stronger than last year and reaching positive territory. We said as well tires, which had a weak first quarter last year, based on Eastern March and April, as you remember, a stronger first quarter than last year that helps us well. The group be stronger in the first quarter than last year and have a less pronounced However, we assume again a staggered increased profitability during the course of the year. To the first question, if you look at the special effects, we have two main effects for 2025 that has in the same magnitude for one part is restructuring, the other is one offs for the spin off. [indiscernible] If you look at the financial results, you have to consider that in the year twenty twenty twenty three, had some special impact driven by the CNY which we didn't see in 2024.

So it will be on the same level in 2025 roughly as 2024.

The tax rate in 2024 is impacted by what we mentioned the beginning of the presentation when we explained the 27%. 2025. [indiscernible] Last point, Capital Markets Day.

So the announcement of the timeline is coming soon, so buckle up.

Reserve your calendar for the whole summer.

So seriously, it will come up in the coming weeks upcoming weeks and Max will inform [indiscernible] the dates are fixed and they will invite you. And then they will also at the Capital Market Days your new short- to midterm targets for both sides Continental and Auto.

Thank you.

Moving over to the next question. Question is from Harry Martin Please go ahead.

Hi, everyone. Thanks for taking my questions. The first one, just coming back to the tire margins. The question really is why would the margins not up more than 20 basis points in 2020 versus 2023. Volumes increased, went from 76% to 81% replacement mix. Increased the premium high rim diameter share. I think you've mentioned some of this is cost related. So how much is the gap between pricing and raw material today? Offsetting some of that positive mix? And can you increase prices recover some of that in 2025? Or is it some of the production sites in Europe that are holding margins back? The second question on the working capital improvement the management of working capital this year, it's been very positive. Can you comment on how sustainable some of those improvements are into 2025? And whether this is more in the automotive side or in the tire business. And then the final question, I'm interested in the the status of the automotive spin off. You've mentioned again monitoring cat market readiness. Clearly tariffs, production cuts, don't make things easier. So can you give a sense of how the debates have been evolving in the boardroom to the new market reality when it comes to the spin off?

And are there any key metrics at all that you're monitoring that would make you delay or reconsider the automotive spin off.

I start with the last month As we indicated, we had we needed to conclude by end of twenty twenty four. Check mark for us was important to achieve let's say, check mark, headcount reduction What was important to achieve that now we are on track in the preparations. We have very detailed separation plan, very detailed capital market readiness plan, and we're on track to execute it to fulfill it. So all our milestones [indiscernible] We are living up to it. Next is Supervisory Board approval in March. Next then afterwards AGM. So So we are on track and we will execute to spin this year in the second half.

So sustainability of working capital improvements in 2025 I guess this refers in particular to automotive. As we have mentioned, we had a substantial working capital improvement Just to come to look into history, we had a huge working capital buildup during the semiconductor crisis.

So 2020, 2021, we've we've piled up not just semicons, but the whole bill of materials. So we had relatively large capital increase during that timeframe. It means we are still not on a level where we cannot further improve. That's what we are planning for 2025. So on number one, we see it sustainable.

Number two, we are targeting further improvements well in terms. And as you've seen with our guidance, it's not based on strong top line growth. This means as well in absolute terms that we are planning to reduce further working capital on the automotive Slide '25. On the tire side, it always remains how the business runs and Quantitec, we will be, as by restrictive, but they are working capital part is less of a point So tire margins, why not more up? [indiscernible] you mentioned, the negatives coming and as well going forward is raw material increases. Of the year, turning around raw materials have been tabled at the beginning and then coming later, there have been a headwind. So it was a negative mid double digit million euro impact in the P and L in Q4. So that weight on those results, number one. Number two, not everything which you see in price mix, which we are showing is going one to one to the bottom line. Obviously, price is going down. But looking on the mix part, this is not one to one getting in, and we are still certain markets as well on The U. S. Side on the first part, which is typically rich As mentioned, raw materials from right now see again an upswing going further.

How this plays out in 2025 in the whole business environment and industry environment? We don't know and that is the same to the increase of pricing. So we will make our pricing decisions based on our volume and profit strategy during the course of '25 And we will try via that as well to optimize our results. Thank you very much. Thank you. The next question is from Monica Bouzio of Intesa Sanpaolo. Please note if you go ahead. Yes. Good morning. Good morning and thanks for taking my question. The first one is on the automotive business and the continued performance towards the market. The car production at a global level would be likely at minus 1% with a negative trend for Europe, especially in the first part of the year. Conti is somewhat overexposed to Europe, So my question is, should we expect the company will manage to perform in line with the market or likely we will see an underperformance by year end in the Automotive division. That's my first question. The second one is a follow-up on the tire business. You say that in the last quarter of twenty twenty four, the raw material impact was double digit million euros negative Can you just give us a rough indication for 2025?

And you also said that maybe there will be some price actions would you see as reasonable by year end an overall pricemix at 1.5%, 1.7% for the tire business. And the very last question is on the free cash flow by year end. As a special effects, you indicated the €700,000,000 But I'm just wondering what is the net cash impact on the free cash flow from restructuring in 2025? Thank you very much. So, with regard to the first one, you're right. If we are looking on our sales weighted, we see in particular or in the first quarter as year over year, Europe is down The light vehicles reduction is weighted negative. It gets them better during the course of the year, but for the full year, it's more in the range of minus 2% Then the flattish or minus one, which we might see somewhere else. So how do we see our business? We want to be at least in line with the market. So we have materialized this last year by better European performance. We've been, as Olaf has explained, short in North America as well as in China. However, on the globe, we assume to be within the market and that's what we want to achieve now at least as a minimum.

Looking for tires, mid double digit million material last year and [indiscernible] million digit number for this year as of now. How much again remains to be seen? Very volatile environment and with the industry performance, which might react, we might see as well our raw material feedstocks reacting to this. Your question, is 1.5% pricemix a reasonable number? If you are looking for the achievements which we had over the last years, 1.5 is within the ballpark. So in particular, once the automotive OE business still under pressure for this year and we want to grow in replacement which has a mix effect itself. Truck remains to be seen if it stabilizes stable. Truck typically is as well, a certain mix effect, but overall that is in the ballpark which we have achieved as well in last year. So that is kind of reasonable. And to your last question, so if you look at compare free cash flow to 2024, we see slightly higher cash outflow from one offs Restructuring is probably approximately in line with 2024.

Okay. Thank you. Thank you very much. Thank you very much. Also from ISA, the next question is from Sanjay Paglani of Citi. Thank you very much for taking my question also. Three questions. The first one is follow-up to Monica's question. On the organic growth outperformance or I think you did clarify that you want to perform at least in line with the market. So on that regard, are you able to provide some color in specific to safety and motion and user experience what drove the organic growth underperformance in quarter four? And if you're already seeing that recovering in first half? And then overall, if you could touch on how do you see the organic growth versus the market in first half versus second half of the year? That is my first question and I'll just follow-up with the next one after this, if that is okay.

So we don't guide specifically on the business area. Performance, Sanjay, so the explanations for Sam Yaks. Olaf has given already. As said, we have said that we want to perform within the sales weighted markets that holds us well true for the individual parts. So it's very much depending on customer as well as on regional mix, how that develops.

Thank you. So second question is on semiconductor and electronic cost tailwinds. Are you able to remind us what proportion of your automotive sales is the electronic cost? And if you are already seeing this as a tailwind, from H1 onwards or any color from the ground on how the electronic costs are now developing?

So to ID2 guide for 2025, overall, we see general cost opportunities on that side, then it very specifically depends on the portfolio and which part on semis we are purchasing. And during the course of the year, we will shed more light on that part. But in general, the trend is there and we are working obviously as well in order to provide those opportunities and stabilize via that our margins So from the €18,000,000,000 production purchasing volume, It is last year, I assume. 40%. Yes, around 40%. Is on the electronic bills, so somehow bound to semicon. So it's a relatively large part and we are relatively large semicon buy. So that depends. The difficulty is still is the complexity we have in particular on the brake, but as well in AVEIC AC was very, very specific ASICs So it does not help to look simply on the general bread and butter and assume that we are capable to get those So it is really the devil is in the detail. And that's why we informed then once we speak. But in general, there is a certain cost trend which we want to profit from. Which we need in order to expand our margins.

So with related to that, should the OEMs so it's because of the mechanics of the pricing pass through, the OEMs will have to initiate the renegotiation, right? This is not like automatically maybe let's say whatever the cost decline comes in. 80% gets passed through to OEMs.

Is that correct understanding?

That is the correct understanding. And with many OEMs, as I mentioned, sustainability into this year. With many, we have as well agreed on a more long term view and longer year view so this is Continental situation. And if anything has to be renegotiated, it has to be initiated. Correct. There's no automatic There's no automatic savings? Correct. Yes.

Thank you. And the last one is on the free cash flow guidance. Sorry if I missed anything. So you are guiding for a free cash flow at mid point at somewhere around stable free cash flow. But the profits are slightly higher at midpoint. And also, Also, can you please remind us what was the total one offs for the Contitec minority stake purchase, which was in 2024 and not repeating in 2025. So just trying to reconcile the cash flow if the underlying profitability is improving and if some of the one offs from last year are not repeating, then why is the cash flow guidance more stable and not improving? Just overall, is there any other headwinds or special items which you should be aware of? [indiscernible] two main special. Topics. One was the €500,000,000 for acquisition of ContiTech shares, so that's minus 500 And we had a positive effect from contract manufacturing that was plus €350,000,000 So these were basically two major if They will not repeat in 2025. 2025 free cash flow, we will see an improved profitability on the one hand. On the other hand, you will have I just explained, let's say, restructuring one offs in the same magnitude as 2024, but higher one offs related to the spin off.

Thank you. That's very helpful.

Thank you very much. Also from my side, Since there are no more questions in the queue, with that, I would like to close the Q and A session and hand the floor hosts.

Thank you, operator. We almost made it on time. Thank you, everyone, for participating in today's call. As always, we, the Conti IR team, are very happy to be available for you if you have any remaining questions. And with that, we would like to conclude for today's call. Thank you. Goodbye. Thank you. Bye bye. Thank you.

The conference is no longer being recorded.