Q1 2025 Dr Ing hc F Porsche AG Earnings Call
Ladies and gentlemen, thank you for standing by welcome and thank you for joining the analyst and Investor call regarding the Porsche AG Q1 sentence Ive had 2025 results.
Speaker Change: This call is being hosted by Doctor Johan breaks no member of the Executive Board for Finance and I T.
Speaker Change: During the intro statement at the beginning of our call. All participants are in decent only mode. After day until we will jump to the Q&A session.
Speaker Change: Anyone who wishes to ask a question they just stop N. One.
Scheib: At this time, it's my pleasure to hand over to be honest Scheib head of Investor Relations. Please go ahead Sir.
Scheib: So thank you very much and welcome to our analyst and Investor call on the first quarter of 'twenty to 'twenty five.
Speaker Change: My name is beyond <unk> and I'm, the head of Investor Relations here at Porsche AG.
Speaker Change: With me is Johann Bracknell member of the Executive Board for financing I T and Yahoo will now give you an update on our first quarter our strategy.
Speaker Change: And the outlook for the fiscal year 'twenty 'twenty five.
Speaker Change: Before we begin let me remind you that any forward looking statements to be made during this interim statement is subject to the risks and uncertainties mentioned in the Safe Harbor statement included in the pulse of materials online.
Speaker Change: This call will be also galvan buy this language and with that I hand over to you.
Speaker Change: Thank you and thank you for joining us for our analysts and investors Q1 2025 call.
Speaker Change: As you've seen in our statement yesterday evening, we keep resolutely pushing ahead with intensifying our extensive strategic re scaling and Recalibration metros.
Speaker Change: At the same time, our business performance is continued to be impacted by the increasing economic and geopolitical challenges as the ballast of further deteriorating best transformation in the luxury segment.
Speaker Change: As a result, we have decided upon further measures.
Speaker Change: As a result of the slower ramp up of electro mobility, we decided a strategic realignment of battery activities.
Speaker Change: Also pulse adjusted its value oriented supply management worldwide due to increasing challenges caused by geopolitical conditions.
Speaker Change: The introduction of U S import terrorists leads to negative impacts for the month of April and May 2025, which are included in the adjusted forecast.
Speaker Change: Before we come to the outlook in more detail, let's take a look at our Q1 results and stopped with all sales development.
Speaker Change: In the first three months of 2025 pulse AG delivered slightly above 71000 vehicles to customers on wholesale level, we sold 65000 vehicles.
Speaker Change: This corresponds to a sales decrease of eight 4% compared to the same period a year earlier.
Speaker Change: Mccann developed significantly positively and it's the best selling bottles series with 22000 vehicles.
Speaker Change: Of this 14000 brought the new all electric mccahon.
Speaker Change: In the ROE is the car you ended with 18000 units sold.
Speaker Change: The sales performance of <unk> in the 911 and 2018 in the first three months was mainly attributable to a base effect against last year and limited model availability in Europe because of cybersecurity regulations.
Speaker Change: On a regional basis, partially counteracted the decline in sales in China with an increased focus on the other regions the share of China sales in Q1 25 was 12%.
Speaker Change: Overall, our global sales footprint has become even more balanced and more resilient.
Speaker Change: As already discussed in our pre close call the demand for the new 911th develops very satisfied even above expectations, especially for the GTS.
Speaker Change: Also the demand for the new electric Mccann remains robust.
Speaker Change: The mix and quality of our order book and say it illustrates that our customers appreciate our exclusive product offering and very much make use of the opportunity to personalize every equals.
Speaker Change: As a result, our average sales price on vehicle sales increased in the first three months to 121, thousands euros compared to 115000 last year.
Speaker Change: Let's now turn to the financial results.
Speaker Change: Policy group generated revenue of $8 9 billion euros in the first three months of 2025.
Speaker Change: Cost of sales increased by 300 million euros, two 7 billion euros at 79% of sales revenues. This ratio was around 500 basis points higher than last year.
Speaker Change: Mainly due to inflationary effects and our supply chain higher material costs also due to the higher best shale as well as the regular customer satisfaction initiatives and fewer two measures.
Speaker Change: We also had to account for higher expense R&D costs. These were a function of a significantly decreased capitalization rate from 73% in the previous year to 48% in Q1 as well as higher DNA of capitalized development costs of the past.
Speaker Change: At 630 million euros, selling expenses were on par with the prior year period.
Speaker Change: The ratio to sales revenue remained almost constant at seven 1%.
Speaker Change: Administrative expenses were slightly higher at 510 million euros.
Speaker Change: The administrative expenses also include a double digit million amount relating to the adjustments to the company organization.
Speaker Change: In combination with the lower unit sales this triggered a very unfavorable fixed cost coverage in the first quarter.
Speaker Change: Accordingly, the Pasha group operating profit stood at 762 million euros in the first three months of 2025.
Speaker Change: The pulse the group's operating return on sales was eight 6% the.
Speaker Change: The EBIT included $200 million of charges in connection with the strategic realignment.
Speaker Change: Around half of it is related to our battery activities and around half relates to the organizational changes.
Speaker Change: As mentioned strong pricing mix and individualization almost fully compensated the unit sales decline as a result automotive revenues amounted to 7.8 billion euros in Q1 the.
Speaker Change: Operating return on sales for automotive was eight 7%.
Speaker Change: The automotive segments operating profit in the first three months of 2025 folks at 678 billion euros Automotives.
Speaker Change: Automotive EBIT a year to date was $1 5 billion euros corresponding to an automotive EBITDA margin of 18%.
Speaker Change: This year, we have earned an automotive net cash flow of <unk> 2 billion so far.
Speaker Change: The net cash flow at the beginning of the year was mainly a function of the following factors.
Speaker Change: First lower cash flows from our operating business, which we outlined before.
Speaker Change: Second lower capitalized R&D expenses inventories increased compared to the end of 2024 due to regular seasonal fluctuations.
Speaker Change: Felt the continued high spending on the development of our brand and ecosystem, we are investing decisively in our future and products software and initiatives that will sustainably strengthened Porsche the.
Speaker Change: These specialty expenses will have a short term impact of the results of the 2025 financial year.
Speaker Change: We are consciously accepting this in the interest of <unk> long term success.
Speaker Change: In doing so we are generally relying on our proven and successful partial strategy.
Speaker Change: Further develop the strategy extensively over the past year in order to adapt to the changed framework conditions.
Speaker Change: After all only a strategy that is regularly and pragmatically adapted who will be successful in the long term. This allows us to respond to the new situation in the markets with the greatest possible flexibility.
Speaker Change: Financial services revenue amounted to one 1 billion in the first quarter.
Speaker Change: Operating profit of the financial services segment Rose 67 billion euros overall, the credit quality of our financial services book is unchanged and very strong.
Speaker Change: At the end of March our automotive net liquidity was at $8 7 billion euros.
Speaker Change: Now, let's move onto the outlook for 2025.
Speaker Change: Yesterday posit decided to adjust the forecast for the financial year 2025 in particular to two special effects for the financial year 2025. The following figures are now expected.
Speaker Change: Our sales revenue between 37, and 38 billion a return on sales between $6 five and eight 5%.
Speaker Change: Motive net cash flow margin between four and 6%.
Speaker Change: In automotive EBITDA margin between $16, five an 18, 5% and an automotive best share between 2022%.
Speaker Change: As a result of the slower ramp up of Electromobility policy decided a strategic realignment of battery activities. The previous plans to expand the production of high performance batteries by telephone group, 100% subsidiary of Pasha will not be pursued independently in the future as a result of this.
Speaker Change: And due to negative impacts from other battery activities the amount of special expenses in the financial year 2025 for the total increase from <unk> 8 billion to $1 3 billion, which will affect results.
Speaker Change: Besides the 700 million euros attributable to the battery related activities around 300 billion euros of this burden are related to product exclusive and software.
The remaining 300 billion euros are related to the organizational changes, which also covered the announced Brookfield specials.
Speaker Change: In addition, pulse has adjusted its value oriented supply management built by its due to increasing challenges caused by geopolitical conditions.
Speaker Change: This applies in particular to the Chinese market, where the continued challenging market conditions and declining demand in the all electric luxury segment will affect development in the financial year 2025.
Speaker Change: Irrespective of this we remain committed to value oriented sales with the aim of balancing supply and demand.
Speaker Change: Additional costs with regard to suppliers also contribute to the subdued forecast, which over proportionally affects the automotive net cash flow margin.
Speaker Change: Introduction of U S import terrorists leads to negative impact for the month of April and May 2025, which are included in the adjustment forecast. However, the adjusted forecast does not take into account felt the effects of the introduction of U S import terrorists.
Speaker Change: Currently it is not yet possible to make a reliable assessment to the effects for the full financial year.
Speaker Change: This extensive measures have been initiated to strengthen the company's financial resilience and profitability in the forecast for the financial year 2025. It is also assumed that the situation in the supply chain to remain challenging and that additional costs in the supplier area must be expected. This is due to individual deliver.
Delays fluctuations in the numbers of units and possible insolvencies.
Speaker Change: In addition, we expect significantly higher expend R&D, resulting from a higher R&D budget.
Speaker Change: Lower capitalization rates and higher D&A on capitalized R&D due to our product and strategic measures.
Speaker Change: In the long term, we have partial pursuing higher ambitions, let's look ahead to the current and upcoming years.
Speaker Change: We will be strengthening our brand cope with emotional combustion engine vehicles last week in Shanghai, We presented the 911th Spirit 70, with a base price above 240, thousands euros in Germany.
Speaker Change: Alongside additional product approaches in the core segment of two dose sports costs, we will be expanding the 911 wrench with a model that will raise the bar even higher our fence will be delighted.
Speaker Change: Regardless of the type of drivetrain, a pulse of you fulfill our customers' dreams ambitious no matter how individuals there may be.
Partially already offers almost infinite possibilities for individualization hour range extends from the selection of individual interior and exterior options to completely customized one offs.
Speaker Change: Before we come to the end one more statement on our dividend payment.
Sex of teeth, and supervisory board have proposed to the annual general meeting an unchanged dividend payment of $2 1 billion euros for the financial year 2024.
Speaker Change: That's two points 30 euros per ordinary share and 231 per preferred share.
Speaker Change: The dividend will be paid out in the days following our virtual annual meeting on Friday May 26 this year.
Speaker Change: We want our shareholders to participate in our future earnings pulse intends to pay an annual dividend of around 50% of Ifr S Group earnings post tax also in the future.
Speaker Change: Furthermore, we will host our capital markets day on September 17th at this event, we will provide you with an update on our strategic realignment initiatives being pulsar and we fully understand and share. Your passion. We might also give you the chance to experience our highly attractive products.
Speaker Change: Thank you for your attention and I'm looking forward to your questions.
Speaker Change: Ladies and gentlemen at this time, we will begin the question and answer session anyone who wishes to ask a question May press star and one on attachment telephone.
Speaker Change: He returned to confirm that just entered the queue.
Speaker Change: If you wish to remove yourself from the question queue. You May press star into please press the star followed by zero for operator assistance in case of technical difficulties.
Speaker Change: Discipline are requested to use handsets when asking your question. Please.
Speaker Change: Please ensure that your others devices, which are maybe watching Dvds team he's put in a completely new to them to avoid inter fantasies.
Speaker Change: The interest of time, please limit yourself to one or two questions.
Speaker Change: As mentioned anyone with a question maybe this time line at this time.
Speaker Change: With that I hand over again to be unshaped head of Investor Relations. Please go ahead.
Speaker Change: Thank you very much and with the list in front of me I can recognize that we obviously have quite strong interest. So therefore gentlemen.
Speaker Change: I would kindly ask you to.
Speaker Change: To stay disciplined and limit yourself to two questions.
Speaker Change: For each participant.
Speaker Change: For the first question, we're going to take Timbral Casa of Deutsche Bank, who will be followed by a wholesale as a mandate by J P. Morgan.
Speaker Change: Tim The line is open to you.
Speaker Change: Thank you very much beyond thank you very much I'm I'm I have two questions and I would tell you after that.
Speaker Change: First question that I think is the most relevant today.
Speaker Change: I mean, even pre tariff we already had a couple of botox for you know theres no doubt that the situation globally, it's very difficult for you, but for the last 12 to 18 months, we now at various wanting something else right.
Speaker Change: It increasingly just feels like every time you meet with your supervisor, who bought the situation gets incrementally worse than what you feared on multiple levels.
Speaker Change: After the IPO looks told us 12% to 14% margin would be the bottom in the worst case now we are below corporate levels were even below GFP levels at this point with the operating margin how do you intend to restore confidence how do you think we can get more contracts a day has actually turned around and site eventually because I still fundamentally. Thank you do the right thing on the strategy.
Speaker Change: It just feels like it's incredibly painful to get there.
Speaker Change: And secondly, I'm, specifically, when we think about China, It's Kai.
Speaker Change: Hard to see that you struggled to find more than 40 50000 people being interested in buying one of your car and it's <unk>.
Speaker Change: I can take market.
Speaker Change: What does it take to see some improvements in the market do we have to wait for the new ice products that will eventually hit.
Speaker Change: Two or three years or is there a possibility for something earlier, but any major economic recovery in that market. Thank you.
Speaker Change: Okay. Thank you very much for your two questions and also for the discipline of sticking to the two questions. So on your first one.
Speaker Change: You were asking about the numbers of at talk releases that we had during the last 12 to 18 months and also you were commenting on the profitability level that we expect for the current year of between $6 five and eight 5% at a I must admit that rather low level now.
Speaker Change: What do you need to see there is that these days looking in various areas of our business, we see a very special and challenging situation.
Speaker Change: We have a diminishing of demand in China with a fierce price competition, we have a slowdown in the best transition in a lot of markets not worldwide, but in a lot of markets and we have the U S tariff situation with just not only hit us directly with our business, but has also indirect effects in terms of volatility and insecurity.
Speaker Change: Now that we see in our various markets. So therefore these are special times and therefore, we really want and we will react to these special times in a special manner and we do that by addressing everything that we can do on our own controlling the business and shaping the business for the future.
Speaker Change: What you need to understand this and I am sure you have seen in our wrap up is stopped.
Speaker Change: The major effects that additional pressure on our this year's profitability or special effects and one time effects. For example, when you look at the battery business.
Speaker Change: With the change strategy with the sofas grouped at something that is.
Speaker Change: A decision we've just taken yesterday based on thorough analysis to address the slowdown in electromobility trend and cut spending on that one I'm also with our holistic profitability program, we look at each and every corner of our business.
Speaker Change: Improve and cut costs generates additional revenues et cetera. So all these measures are ongoing and last but not least the strategic realignment. We are doing is something that we really believe it's something that is worth paying for in this year with a rather low margin for benefits to come in the year.
Speaker Change: Yes.
Speaker Change: Come up with a more robust then again also again more profitable business and business model now on China, you were mentioning 40 to 50000 units and I agree. If you look at the history of China, We were sitting on almost 100000 units.
Speaker Change: Two and three years ago in 2022 2023, a record sales day last year, we dropped down to 56000 and it's.
Speaker Change: It's clear that we will not achieve a comparable number this year, we will definitely expect sales in the forties in 2025, we address the market short term and midterm short term, we have launched various special editions of active with passion and bottles.
Speaker Change: All the names for these in the especially SUV segments.
Speaker Change: These models are much more attractive to the Chinese market.
Speaker Change: And then the regular ones that were in the market before and from about we assume that we will have an additional stimulus on demand to achieve the numbers that I've, just mentioned midterm and long term.
Speaker Change: Right. The updated our product strategy is something we want to built on we will increase the amount of supply that we have in our portfolio for ICD and ultra plug in hybrid vehicles, which would also help of the Chinese market and last but not least when it comes to the electric cost in China. These are under severe pressure.
Speaker Change: But even there there are some ideas that we can follow to improve the situation a bit but having said all of that.
Speaker Change: What is clear at least from my perspective is that we will not see China coming back to the levels, we achieved in the past.
Speaker Change: I think that midterm.
Speaker Change: Situation doesn't change completely we won't see much more sales than the levels we.
Speaker Change: See this year and maybe the last year and in that range.
Speaker Change: Thank you.
Speaker Change: Thank you very much the next and the ROE will be of course save from J P. Morgan, who will be followed by Patrick from UBS.
Speaker Change: Sure.
Speaker Change: A couple of questions. Please.
Speaker Change: Can you comment on on how you want to take this.
Speaker Change: Price discipline within the business.
Speaker Change: And also how do you think about increase in Paris to mitigate any of the tariff pressures we're seeing currently the market.
Speaker Change: Second cost will be looking at your press release yesterday.
Speaker Change: It looks to me like that there are three categories.
Speaker Change: Of course, so one is the battery second wirelessly.
Speaker Change: Forest impact for a couple of months and then you have a third category, which is I think.
Speaker Change: Our basket of supply supplier payments and other actions, which elements do you think are one offs that we should reverse into 'twenty 'twenty six and im asking this obviously.
Speaker Change: Is the idea that a porsche must be a double digit EBIT margin company not low single digit and some of these elements that we are.
Being in 2025 will surely be a reverse next year. Thank you.
Speaker Change: Okay. Thank you very much to your first point pricing discipline. This is really of utmost importance for us and our business model and our brand being a luxury player in the car market. We definitely don't want to play the volume game and we do not do that we follow our value.
Speaker Change: Value over volume strategy and whenever we see that demand is declining and we cut production. So that we align supply and demand and that we have you know this one unit. That's in the market then the customer's demand to keep a certain level of scarcity and exclusive missed there.
Speaker Change: The clear strategy that has been followed for the last years and that will be a way to go also in the future now with the tariff situation in the United States short.
Short term, it's a bit more difficult because we are still in the kind of observing situation. We monitor what the discussions are.
Speaker Change: Bringing debt.
Speaker Change: That are currently.
Speaker Change: Undergo in between the United States and the European Union and also there are some discussions between the Trump administration and various companies in Europe like for example, the Volkswagen Group and we wait for the results of these talks and negotiations to see if the situation will change so waiting for this information we have decided to not.
Speaker Change: Adjusted pricing yet in the United States and therefore, we have this one special effects that we need to swallow and digest the additional tariffs in our margins for April and May volumes, but having said that if negotiations do not turn out to be successful at the tariff regime would stay as we see it today.
Speaker Change: We will definitely increase prices in the U S to have some mitigating factors on our margin and margin quality as compared to what we see in April and May.
Speaker Change: Now the second question was on.
Speaker Change: The main issues, we have released yesterday with the attack statement batteries are terrorists and.
Speaker Change: You were mentioning also the supplier situations now with a better risk the biggest.
Speaker Change: Burden that we have in 'twenty 'twenty four is the strategic realignment of our sales Force group, that's definitely a one off it's a write off of the assets that we have a sales force group that we do because we have decided to not scale the production.
Speaker Change: The battery cell within Salesforce group at the location that we have in the southern part of Germany, we are evaluating partnering approaches or other strategic directions.
Speaker Change: But based on the decisions that that's been taken yesterday against the backdrop of slower or Beth a transition is something that clearly can be seen it needs to be seen as a one off Paris difficult to tell S. Just elaborated on we need to see what would happen with the tariffs and then we can see them all.
Speaker Change: The situation will be the second half of this year and also in 2006 are ongoing and when it comes to the suppliers. There's there's still additional pressure on our profit margins due to.
The pressure in the supply chain, especially change demand.
Speaker Change: Compared to the expectations that we have on the best site.
Speaker Change: We need to address capacities on the supplier side and is this still something that is putting pressure on our partners, where we are in good talks or negotiations or to find a solution.
Speaker Change: Once we start with that one we expect a more stabilized.
Speaker Change: Our situation last but not least as you know we have also a 300 billion burdening our onetime effects for the adjustment of the workforce. That's something that will be also posted against our 20 to 35 results of the benefits of the reduced workforce will then kick in starting as of 2026 with first minor effects.
Speaker Change: Of the whole business case will build up over the years to come.
Speaker Change: Thank you very much so the next in the role will it be Patrick of UBS and he will be followed by Harold from Citigroup.
Patrick UBS: Thanks, Jeremy and good morning, you have also two questions from my side the first one.
Speaker Change: When it comes to the new guidance for the full year.
Speaker Change: Hugh you basically tell us indirectly that if you can't 100% offset the tariff by a higher pricing from June onwards, there. It's gonna be another profit warning later in the year am I misreading that because if I just extrapolate you know two months 300 million euros that means.
Speaker Change: The remaining seven months is a 1 billion or 1 billion zero five and then we can pick our own assumptions on you know what you can offset on the pricing, but let's say if the suvs are more difficult to price because they've got local competition and you predominantly tried on the 911 product line, we could have yet another.
Speaker Change: 5 billion or so of burden coming later in the year and I'm just not clear.
Speaker Change: What's the rationale of not factoring in anything for the second half here, because assuming the offset of of everything via pricing seems a quite boat assumption to take so if you can clarify that I'd greatly appreciate it and and the second one obviously you know it's it's related to.
Speaker Change: Question about investor confidence and trust.
Speaker Change: The management team the executive board rebuilt two positions have been changed including yours, obviously, they're there more to come at least that in the last call that he doesn't consider his dual role as the you know permanent for the future I'm I'm just wondering given the quite.
Speaker Change: Challenging situation of the company to say the very least I think one element of rebuilding trust with investors is a swift execution of the executive board rebuilt. So I'm. Just wondering you know what kind of timeline. We're talking here to have really you know a complete rebuilt of the executive board and your team that can work on.
Speaker Change: Regaining Investor Trust. Thank you.
Speaker Change: Yeah, Patrick Thanks, and start with your first question on the reduced.
Speaker Change: Guidance and the.
Speaker Change: <unk>, whether there is more to come.
Speaker Change: Because as you correctly stated we have not incorporated in the updated corridor.
Speaker Change: The effect of a potential scenario with U S tariffs being in place for the fall.
Speaker Change: Our fiscal year. So why have you chosen that way to go ahead first.
Speaker Change: We've added the April and May effect, because we quite clearly see what will happen in April and May I mean, today's April 29th So that's more of that's already in the books and also with May we have taken some decisions that we still want to observe the market wait and see what will happen. If the situation will stay as it is or whether there.
Speaker Change: We'll be some easing elements.
They're so therefore, we've incorporated April and May effects, we have not.
Speaker Change: Forecasted anything for the remainder of the year, because we see so much volatility there. So much uncertainty so any scenario that we might have put into the guidance would potentially turn out to be the wrong. One. So therefore, we clearly stated it's not in their rates of what will be the results of the negotiations going on and based on that we will.
Speaker Change: First make our operational decisions, especially in terms of pricing and then second if needed.
Speaker Change: If needed we will inform the market.
Speaker Change: Accordingly.
Speaker Change: Second is it fair to say then if I can just follow up here that.
Speaker Change: If the rules don't change your assumption your base assumptions not a full offset via higher pricing it would be some upside as you said before but we can only speculate what that is.
Speaker Change: Yeah.
Speaker Change: What we definitely will do its a differentiated pricing approach because we see a different competitive situation for our various models.
Speaker Change: 911, tallboy something completely different in terms of market demand and competitive situation as opposed to for example, based on my car models. So therefore, you can expect a differentiated pricing, which makes a lot of sense to come up with a sweet spot in terms of margin stabilization and volume effects that we.
Speaker Change: So that's correct and the other on top of that and would be still to be decided on once we see how the tariff scenario will play out for the remainder of the year.
Speaker Change: Second question you had on the Executive management Board and that's something Patrick and Hope you understand that it's really hard to comment on from my side, that's really up to the supervisory board who is in charge of executive Board.
Speaker Change: Nominations so.
Speaker Change: Let's wait and see what is ladies and gentlemen, we'll come up to in terms of decisions in terms of persons in timing and last detail on that one was a dual role of Oliver again, that's also something that cannot be commented from my side Oliver.
Speaker Change: Commented his view on that one in various occasions and.
Speaker Change: Also it's a supervisory board question in both brands Volkswagen and culture.
Speaker Change: Decided on that one.
Speaker Change: Sure. Thank you.
Speaker Change: So the next one into road then we'll be Harold of city and the next after Harold is gonna be Stephen off Bernstein.
Speaker Change: Yes, good morning, and thanks.
Speaker Change: Thanks for hosting the call today too.
Speaker Change: Two questions from my side, specifically I think it's sort of opportunity to be talking to you. This morning, as the new CFO, obviously, you've had to go through all of the numbers and everything to make sure you're very comfortable with where we are today, so kind of two questions for you firstly.
Speaker Change: How do you ensure a CFO that you are aware of and ahead of all of the different issues that Porsche is facing right. If you think about all the warnings we've had in the last two years, there's been a multitude of issues and not all of those have been known about by investors are ahead of time.
Speaker Change: How do you know and how can you assure us that you are on top of your provisioning and addressing all of the different issues.
Speaker Change: That pushes facing for the first question and then secondly, slightly different take on the same question from that we have from Tim.
Speaker Change: But all of it.
Speaker Change: Let's say the current level of profitability push is very very different from where it was at IPO. The long term margin trajectory got changed anyway, obviously previously.
Speaker Change: How do you think about the profitability of the company looking at 2025 and relative to where you think it should be investors are clearly, saying that the long term margin of the company is it's very much below where it was during the IPO.
Speaker Change: But has that has the positioning of the company and the market changed so much that you would agree with that assessment or do you think the 15% to 17% that you already reduced it to is it still relevant thank you yung.
Speaker Change: Yeah, all right. Thanks for the two questions on the first one.
Speaker Change: How do I want to make sure to be a variant ahead of the issues of the intelligence that we have and being ahead of the curve. So.
Speaker Change: First of all I think we all need to see understand and admit that these are really challenging and dynamic and volatile at times that we see in the various markets. We discussed on China already also the tariff situations that you asked is something completely new for us directly but also with indirect effects of affordable by the economy.
Speaker Change: And.
Speaker Change: On top of that we see the technological change into the best of transformation, taking in a much more lower than we assumed that it would be so there are a lot of things that are going on but we need to tackle and.
Speaker Change: You know understanding of what the challenges are is we need to have a good knowledge in the markets.
Speaker Change: We communicate regularly with everyone. We have a great team in all the departments, especially also in the finance area a lot of people that I can fully rely on and.
Speaker Change: What we have done during the last couple of weeks I can understand that as something that would be not be expected in the first place or changing the expectations.
Speaker Change: In such a short period of time, but we've done that based on thorough analysis strategic adoptions that we wanted to do to shape the business for the future and it is based on clear data analysis and something that we can.
Speaker Change: Built on.
Speaker Change: On the margins.
Speaker Change: For $6 five to eight 5% is a level that is not.
Speaker Change: Sufficient for Pasha, there's something that we are not happy with that's clear, but again, what I really want to stress here is and explain the steps there are a lot of onetime effects and strategic investments that we are doing.
Speaker Change: To shape the company for a robust and more profitable future.
Speaker Change: For example, the sofas group situation that you have that's.
Speaker Change: Higher 3 million burden.
Speaker Change: Burden that we have this year for the special write offs, we have to just strange strategy reacting to the slow down best trend.
Speaker Change: So with that example, you can see that we that we really take also critical decisions about right decisions to cut the bleeding in some areas with investments that are based.
Speaker Change: Based on today's perspective would not pay off anymore again for the sake of a better future are the 15% to 17% in the midterm.
Speaker Change: I'll still the numbers that we would generally see for the company.
Speaker Change: Jumping to that number from today's six five to eight 5% is quite a way that's clear, but if you deduct the one offs and at the strategic.
Speaker Change: T J initiatives that we have taken that still a target or an ambition level.
Speaker Change: That we are striving for but again, having said that that's most probably can only be achieved when we see a different which means.
Speaker Change: A bit more settled down and positive geopolitical environment in the future as opposed to what we have in China in the states.
Speaker Change: Today.
Speaker Change: Okay. Thank you.
Speaker Change: So next in the ROE would be Steven from Bernstein, and after Stephen We've got Mike from HSBC.
Speaker Change: Yeah.
Speaker Change: Yes, good morning.
Speaker Change: To focus, particularly on China. Please.
Speaker Change: When I look at the the presentation that was made at the full year stage, you put a slide out there showing how you plan to reduce the points of sale.
Speaker Change: And the idea was to go from 144 dealers at the beginning of January of this year down to 100.
Speaker Change: January 2027.
Speaker Change: Given the collapse in your sales and when based on the registration figures I see.
Speaker Change: Youre more trending towards the mid thirties based upon the registrations you had in the first quarter of this year.
Speaker Change: How would you comment on the pace of that and secondly, I think you did point to the weakness in China and you highlighted the weakness of the premium electric segment.
Speaker Change: But clearly the weakness supports shares also on some of your core products like <unk>, which drives down by about 38% in the first quarter and Panamera library in China called down between 2% and 911 done by about 15% of these registrations in the first quarter year on year against very weak comparisons EMEA before so could you comment more about.
Speaker Change: How quickly youll changing the cost structure and also the paradigm because obviously, having a lot of dealers. It also probably look great.
Speaker Change: From a pricing perspective as well thank you.
Speaker Change: Yeah.
Speaker Change: China is a TV market, that's clear, but we remain in managing the market on the strategic perspective, following our value over volume strategy and not playing the price ballgame and positioning.
Speaker Change: Positioning pulse is still as a luxury brand with.
Speaker Change: Price premiums that we touch from our customers in most areas are also able to talk from our customers. When it comes to the reduced volumes you're totally right. We were sitting on almost 100000 units in 'twenty two 'twenty three we're down to 56 last year and this year.
Speaker Change: We expect volumes.
Speaker Change: Slightly above 40000.
Speaker Change: A fair estimate that we see and based on these numbers and we have to and we do adjust our structures both internally at our pipe part of China organization, but also when it comes to our partners in the dealerships in the market.
Speaker Change: Our plan is still to reduce the number of point of sales by around about a felt so from give or take 150, a point of sales to 100 in 2027 and that strategy is pushed forward.
Speaker Change: Currently for Us all.
Speaker Change: <unk> already closed and others are to come the negotiations are going on with our dealer groups our partners so that we.
Speaker Change: Achieve a joint strategy, taking out the right dealers in terms of geographic footprints, which means where they're located but also about what wanted to wish that of course, we want to take those dealers of the net debt.
Speaker Change: But that are not performing as good as others will not be sufficient as of today based on our strategy. We would argue yes might be on the slightly lower or higher end 100 point of sales in the market, but that's something that we will monitor constantly and SUV, we're arguing in other circumstances instead of <unk>.
Speaker Change: We can only be successful when it's adopted an updated two circumstances that might change and that's also the case for China in general, but also for the number of point of sale. So if a further downturn scenario would be there of course, we would also revisit.
Speaker Change: The dealer network.
Speaker Change: On the second question.
Speaker Change: You are right, we are struggling a bit with the fully electric cars, because we see that in China out there has not yet been the establishment of a luxury segment for full electric cars above 600000, Reminbi. There's a lot of pressure on oil tycoon and also the newly introduced introduced Mccann full electric S stopped it.
Speaker Change: With some sales, but it's not.
Speaker Change: Kicking in and selling as good as we were expecting now when it comes to the combustion engines cars of course since the whole market is under pressure.
Speaker Change: Given the developments, we see there we also see some negative effects there, but we answer them with product measures, especially with our Suvs. We've added special editions. Depression addition for example on the Cayenne and the active additions which are much more.
Speaker Change: Attractive to customers and we expect that that will stabilize demand on these.
Speaker Change: Cars, the 911 and that I want to mention is something that is a car that has really healthy demand also in China. If you compare it quarter by quarter of course, you see some seasonality in effects there, but the 911 is really at the core of the brand as our icon performing very well in China, and if you've seen our presentation.
Speaker Change: At our booth in Shanghai at the auto show and that really underlines that exist across the brands and something that we want to.
Speaker Change: Also play out much stronger in the future.
Speaker Change: Talking about our heritage and legacy that we would argue no other brand can build a business upon.
Speaker Change: Thank you.
Speaker Change: Thank you. So the next into row is asset Mike of HSBC, who will be followed by a horse of bank of America.
Speaker Change: Gentlemen.
Speaker Change: Okay.
Speaker Change: I don't know if you can hear me.
Speaker Change: We can hear you you do.
Speaker Change: Really I'm.
Speaker Change: Just a couple of questions for me.
Speaker Change: First off just talking about the U S. I Wonder if you can explain if you've still got you.
Speaker Change: Are you still taking orders in the U S.
And.
Speaker Change: What is your ability to change pricing once those orders are in the book.
And then the second question is just around I guess I'm trying to understand this is probably a compensation piece. So.
Speaker Change: We already had some supply compensation the weaker volumes means more supply compensation.
Speaker Change: But given what you've done on so forth is there a possibility that the supply of compensation piece continues on because you won't have.
Speaker Change: The ability to.
Speaker Change: To make those batteries yourself.
Speaker Change: When do we see the end if supply and compensation is that a function of negotiation or is that a function of waiting for volumes to recover.
Speaker Change: Thanks.
Speaker Change: Yeah, Mike on your first one in the United States I can keep that shortly and Chris. Yes. We are taking orders we are happy if our free customer coming to the dealership and signing the contract for one of our fantastic cars and second yes, we can change our pricing before the car is.
Speaker Change: It delivered if you want to do so as explained we have not decided on price increases yet if tariffs stay that's something that will come for the second half of the year.
Speaker Change: On the supply side and the Bourbon and pressure we have from the supplier issues when will that be finally settled that's.
Speaker Change: Not about volumes to come back again, it's about the negotiations that we are still doing for various model lines, where we see that the expected demand and therefore production volume will be lower than we initially expected and planned for in our car projects and therefore also nominated our suppliers based on this information and what we're doing here is that we have.
Speaker Change: Adjusting capacities with all the suppliers in this specific model lines, especially on the electric mobility.
Speaker Change: Module lines to the level that we see as a healthy demand.
Speaker Change: In this year into years to come and that's an ongoing process that won't last forever of course, but we definitely have a $3 million.
Speaker Change: A three digit million burden this year and.
Speaker Change: Since this is a rather complex issue into our auto more electric cars to come we also expect additional burden in 2026.
Speaker Change: But is that an element of that that's one off.
Speaker Change: You make the payment to the supplier to compensate them for the fact that you're not going to do the volumes and then you go forward on the assumption that it's going to be lower volumes or is it as long as the contract rolls you have to keep.
Speaker Change: Feeling Tycho pay essentially.
Speaker Change: It really depends on what we negotiate with our suppliers I mean, each and every company and part is in a in a specific situation. So there are various ways. How we can settle the situations that we have out there are some one time effects that we have especially on the cash side in the car.
Current period, and maybe also into next year and there are other things, where we see the parts prices on an increased level of them over the period of the production of the car. So that's really a mixed situation because we tried to find the best economic situation for each and every supplier and partner with the debt repurchase.
Speaker Change: Yes.
Speaker Change: Got it thank you.
Speaker Change: Yeah.
Speaker Change: Okay. Good so we are getting closer to the last minutes off the calls the next will be Horst and then we take Philippa.
Speaker Change: After Philip It then we have hanging in after him Adrian and then we've got it.
Speaker Change: Alright, and my own.
Yeah good morning.
Speaker Change: I hear you.
Speaker Change: Yeah, Alright, hey come on young and team. Thanks for taking my question.
Speaker Change: I have got to pay more for costs related to the fed.
Speaker Change: One hopes up to my question that I had also on before your car.
Speaker Change: So it's about.
Speaker Change: The revenue guidance now going from a minus five.
Speaker Change: Minus 8%.
Speaker Change: H P M.
Speaker Change: Plus four so what can be done and think about the split between English Carlos.
Speaker Change: Hi.
Speaker Change: Set that affords you a call.
Speaker Change: So its decline for part b malls or significantly less than minus 10%.
Speaker Change: It looks to me as a thousand minus 10% or somewhat baked into your guidance. So maybe you could comment on that and the second question is a tariff related.
Speaker Change: If I take the 300 million for April and May I, just take this number times six and I have got just theoretically in your life.
Speaker Change: Right and.
Speaker Change: And you talked about.
Speaker Change: On tariffs and Bloom.
Speaker Change: Negotiates are also in the U S.
Speaker Change: Also if you think of constant management Mega beer.
Speaker Change: Say that products could be localized Audi and Porsche up I mentioned in the context. So is it that we could expect kind of localization of production and then to get them except Canada.
Speaker Change: Something you're aiming for I know, it's difficult to answer that question, but any indication would be helpful. Thank you.
Speaker Change: Yeah. Okay. So let me try to be helpful. Dan and then I'll start with the second question that you raised on the tariffs. So first element you were commenting on their asking whether you can take the 300 million from April and May time seeks to have a full year effect.
Speaker Change: Statement no because in April and May we swallow and digest the additional tariffs.
Speaker Change: Terrorists in our margin and we do not have any compensating.
Speaker Change: Activities, there because as I said, we observed a market rebates.
Speaker Change: The outcome of the negotiations relative to a bunch of disrupted negotiations. So therefore that's disc.
Speaker Change: Decisions, we have made that we protect our customers from the terrorists in these two months if tariffs stay.
Speaker Change: It's not a strategy we would follow we would then definitely go for a differentiated pricing strategy across the model ranges and upwards.
Speaker Change: Is the pain that we have from the additional tariff so the burden on the full year it would be definitely a much lower than six times the 300 million.
Speaker Change: But on the girl on the cross lever that is possible of course, you have cost mitigation measures, but just the cost impact is 300 million times six more or less.
Speaker Change: But it really depends on seasonality on the model mix, we have there so I'm.
Speaker Change: Sure I mean, if tariffs stay the same and our numbers of course stay the same our pricing stays the same everything stays. The same then you could do the math in that way.
Speaker Change: A bit more complex in terms of the specific costs that we see in specific month and the seasonality plays a quite a big role.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: The other aspect was on the on the negotiations that are also and.
Speaker Change: Participated by Oliver and at the interview that you were mentioning now coming to localize production in the United States for others, possibly still do not see that based on the tariff situation that we have today that our business model with local production would pay off.
Speaker Change: But having said that of course with what we do with the strategy in general and also on this aspect is that we review that situation regularly we need to see about the final tariff regime will be will need to see how the market reacts on our pricing strategy if that will come in as we are modeling it in our and our analysis or if.
Speaker Change: There are other effects that might kick in that we need to incorporate so we will definitely revisit that regularly but as of now we have no plans to localize production.
Speaker Change: For Porsche.
Speaker Change: The other question was on.
Speaker Change: It's on Asps.
Speaker Change:
Speaker Change: And volume, we definitely expect retail and ultra wholesale wholesale volume to be.
Speaker Change: Below 2025 numbers.
Speaker Change: So that's for sure that we have a reduction in volumes there following as I said of the production cuts that we need to not oversupplied markets.
Speaker Change: Support and sustain our value over.
Speaker Change: Volume strategy as you've seen in the first quarter, we were able to increase ASP.
Speaker Change: And we also expect that that will be the case for the full year. There are additional price increases and now I'm talking worldwide not talking about the U S tariff situation with the next model year to come in the next few weeks and that will help on the ASP side and also we're constantly driving mix optimization and individualization on the project. So.
Speaker Change: Product. So yes, ASP increase will help to compensate some of the volume losses that we expect for the current year.
But the ASP increase currently is mainly driven by mix not that much by price increases correct.
Speaker Change: Yeah.
Speaker Change: It's it's driven by both it's it's driven by growth.
Speaker Change: And additional price increases will really kick in as.
Speaker Change: As of summer.
Speaker Change: Okay, Alright, Thank you Ron all the best so thank you taking a look at the remaining time Philippa handling and Adrian I would kindly ask you to limit yourself to one question in order to give everybody on this call at the chance to ask that question. Thank you very much.
Speaker Change: Yeah.
Speaker Change: Hi can you hear me now.
Speaker Change: Jefferies Yeah, Okay, sorry about that.
Mike: Yeah, Mike I'll stick to one question is just.
Speaker Change: I'm listening to you you'll find them and how you framed the guidance.
Mike: And.
Mike: It seems like part of you assumes that part of the guidance assumes says terrorists may go away.
Mike: And.
Mike: Even though you discussed China, you focus the market on China volume and you know with meeting that the volume in China, 40, 50, K, maybe down half maybe half when he was at a peak and why wouldn't allow it to happen in the U S.
Mike: I know you think Youll be index 911, 911. This is a unique product.
Mike: Now you can buy a corvette instead, but you're probably going to buy 911.
Mike: But if you're a buyer for a mccann or for a <unk> again you have alternatives.
Mike: So I'm just trying to understand at one point you know could we could be looking at U S volume being half what it has been in the last two years.
Mike: And how much are you willing to basically.
Mike: Dropped the volume because you can only pre.
Mike: Price part of your range not all of it I'm just trying to get a sense of what's missing in your guidance. Thanks.
Mike: Yeah, so let.
Mike: Let me first it makes it very clear and explain the.
Mike: Assumptions that we have in the guidance when it comes to the tariffs. We've included the effect for April and May because we see them quite clearly.
Mike: And these effects will come and therefore, we've included them in the guidance. We have not included any other effects on potential tariffs.
Mike: In the United States because the situation is so volatile you get news every day, sometimes every hour speculations.
New data points, new facts or things that are supposedly affected you do not know whether it'd be our informational fact full and also therefore, we set a reliable assessment on the tariff situation for the full year is not something that we can do today and we did not want to put any scenario into the guidance and then change.
Mike: Again, our strategy was to really clearly state that we have not included effect as of June until December and that's something that we need to work on when we see how the tariff situation Bill finally be set in the United States will it go away I don't know would be great. I mean, we are.
Mike: Q4, free and open and fair trade, but that's something that needs to be seen and as I said, we will do our analysis on facts rather on speculation.
Mike: Second question on China.
Mike: China and the United States. These two markets really cannot be compared to what we see in China today that we have two things first.
Mike: Yes, the pricing competition when it comes to transaction prices and second we have especially local products are positioned at a price point that it's not.
Mike: Some percentage points of higher or lower than that of cases lower than our products or other versant products. This is really a completely different game that is played there when it comes to pricing, but we will probably do if tariffs stay in the United States. We are talking about percentage points of course, given the price elasticities that we know from our market research there will be some volume.
Mike: Reaction.
Mike: But we definitely would not expect a meltdown in the United States as we've seen it in China during the last two or two and half years.
Mike: Thank you very much.
Speaker Change: So the next into ROE is heading and then we've got Adrian.
Speaker Change: Yes. Thank you very much I'll try and hurry up I just wanted to follow up on what in your mind will reverse in 2026 compared to 2025. So I thought we had sort of laid out a about a cut at that.
Speaker Change: Full year stage, just about the incremental.
Speaker Change: I think you referred to them some sometimes as one offs now can I just clarify do you have an additional 500 million noncash impairments for cellphone scoop.
Speaker Change: But that's about the extent that you see incrementally reversing next year. So in combination all with the previous warning you had the 300 million for all dried restructuring or organizational.
Speaker Change: Changes and and now the 500 noncash impairment, but the rest will well basic he will basically stay in the accounts I just wanted to clarify that and then in terms of what you expect in terms of volume.
Speaker Change: To persist.
Speaker Change: My understanding is we're talking about 20000 units or so down of which about 15 or so in China with additional price increases coming in the U S.
Speaker Change: Is it still valid.
Speaker Change: The 300 round about 300000 unit level that we talked about at the full year stage or is it perhaps more prudent now to think of that as a sustainably lower number going forward as well. Thank you very much.
Speaker Change: Yeah, So quick answers to your questions.
Speaker Change: The two main one offs that will reverse for 2026 are the ones that you were mentioning the accruals that we need to do in the provisions for the re scaling of our workforce on 300 million, what's the number you're out there and you are right. The strategic realignment of the cellphone scoop is a write down of the assets that.
Speaker Change: Do you have there and that's for sure also a one off effect. So these are the major ones.
Speaker Change: The investments into products and software.
Speaker Change: It can.
Speaker Change: Can be seen in the P&L as additional R&D and Capex.
Speaker Change: What is explained also in the full year is that we expect elevated levels for these two strategic capital allocation items for the few years to come but then.
Speaker Change: You know the there will be a pivot and things will change once.
Speaker Change: The product portfolios updated to the new strategy and the new product side. This is also the most important part of the answer for the volume question.
Speaker Change: So given our product portfolio that we have today at the market situation we.
Speaker Change: We will not see 300000 units in 'twenty or 'twenty, five and you know that the update of our product portfolio can't be done within a few months that something that really depending on whether you do a small limited model or something like that or whether you have a complete new model, but they're talking at two to four years until additional model kick in.
Speaker Change: So volumes of 300000 units is something that we would.
Speaker Change: Based on our value over volume strategy expect that can be achieved but that's something that we need to build on based on our sales that we see this year.
Bert: Thank you Bert.
Bert: Thank you. So the next into road, then we'll be Adrian.
Adrian: Good morning, Thanks for squeezing me in Yeah, just a follow up question really from Mike earlier on the call.
Speaker Change: Phil you mentioned that the U S orders are still open.
Speaker Change: Just wondering if you could comment maybe on the order intake rates either at a retail or even the dealer at the wholesale level, what I'm really kind of trying to get out of some customer behavior.
Speaker Change: Such as is there some pull forward in demand in March and April and would you expect some selling day.
Speaker Change: We see we see a normal demand pattern based on seasonality is that we know and based on the product offer that revenue United States there were no.
Speaker Change: Significant orders pulled ahead.
Speaker Change: Into March.
Speaker Change: February and March before the before the tariffs kicked in so yeah, we see a robust and stable situation in the United States and those special effects based on the tariffs.
Speaker Change: Thank you very good and they're very very lost is from Anthony and Anthony I also count on you that you limit yourself to one question.
Anthony: Yes. Thank you it's a very quick one on my side.
Anthony: And it's just on China, you mentioned the ongoing negotiations with the dealers.
Anthony: I'm just wondering if we should expect some provisions at some point.
Anthony: I was just thinking you know around 40 50 days and it.
Anthony: It sounds organization to be reviewed.
Anthony: Insignificant impact.
Anthony: Just wanted.
Anthony: To check with you on that one.
Anthony: In general it's in the interest of both all the dealer groups and us to come up with a dealer network that fits to the market size and the demand. So therefore, we are in good discussions and negotiations.
Anthony: <unk> with the dealers continuously and therefore.
Anthony: You should not expect significant onetime effects for the reshaping of the dealer network.
Anthony: Minor budgets that we need therefore, the one or the other city.
Anthony: Situational specific dealerships, but in general that's something that is done on good talks with the dealer groups.
Anthony: Perfect. Thank you.
Anthony: So young gentlemen, thank you very much for this conference call your questions and Yahoo, with your answers for the relevant interest.
Anthony: As you all have outlined earlier, we've gone to a host of capital market stay on September 17th and Germany.
Anthony: Presumably on the Hochenheim ring, which will not only give you the chance to get update on our strategic realignment.
Anthony: Our outlook and what the company is undertaking to the degree to increase their resilience.
Anthony: And also the total product offering and innovation, but at the same time, we'll also granted to your opportunity to experience our products and to share the passion that we and our customers have for Pasha.
Anthony: If anything should be open.
Anthony: I asked this at their disposal stay all health here.
Anthony: And we stay in touch and thinking about my colleagues.
Anthony: Colleagues. Thanks for dialing in talk soon after H, one and then I'm looking forward to meeting all of you at the Oppenheimer thing.
Anthony: Have a great day.
Anthony: Ladies and gentlemen, the conference is now over thank you for choosing chorus call and thank you for participating in the conference you May now disconnect your lines Goodbye.
Anthony: Hum.