Innovative LED Airfield Lighting Solutions

HELLA KGaA Hueck & Co., one of the world's leading automotive suppliers, successfully continued its international growth trend during the 2013/2014 fiscal year, which ended on May 31st, 2014. Based on the preliminary business figures¹, HELLA generated Group-wide sales of approximately 5.3 billion euros (previous year: 4.8 billion euros²). This equates to growth of about 11 percent. Adjusted earnings before interest and taxes (EBIT) for HELLA increased to approximately 390 million euros (previous year: 290 million euros). This improvement represents an increase in the company's adjusted EBIT margin from 6.0 percent to 7.3 percent. Even taking into account the one-time effects of the voluntary partial retirement and severance payment program, the EBIT margin increased slightly to 6.4 percent. "Leading technology and an international presence are the keys to successful company development," says the Managing General Partner Dr. Jürgen Behrend. "High demand for innovative LED and electronic products and a high operational performance level have resulted in very positive trends for sales figures and earnings."

Business divisions experience dynamic growth
In the past year, HELLA saw positive growth in every segment, most significantly in the Automotive segment. Primary growth drivers were the additional market penetration with full-LED-headlamps as well as high demand for innovative electronic products, including electric steering, sensors and actuators for reduction of fuel consumption as well as driver assistance systems, specifically those based on 24 GHz radar technology where HELLA is among the global market leaders. In the Automotive segment, sales increased by 14 percent to approximately 3.9 billion euros (previous year: 3.4 billion euros) at an EBIT of approximately 290 million euros. Business in the Aftermarket segment grew by about 2 percent to equal sales of approximately 1.1 billion euros (previous year: 1.1 billion euros), but was also negatively influenced by exchange rate fluctuations. The EBIT in this case was 80 million euros. Sales increased slightly by 1 percent to 0.3 billion euros in the Special Applications division (previous year: 0.3 billion euros) with an EBIT of approximately 30 million euros.

Positive earnings trend
The EBIT margin grew significantly throughout the Group, driven primarily by the Automotive segment. This includes the effects on EBIT from one-time expenses in the amount of 50 million euros for a voluntary partial retirement and severance payment program at the Lippstadt location in the recently concluded 2013/2014 fiscal year. The positive trend stems from operational improvements and optimization of global positioning, in addition to the increased sales volume. "Today we have an organization that operates with exceptional efficiency, an appealing product portfolio and a strong position in global growth markets," says Dr. Rolf Breidenbach, President and CEO. "Together with our investments in future growth drivers, this gives us a promising starting point for the coming years."

Sound financial base strengthened further
The operational success of the 2013/2014 fiscal year presented Hella with an opportunity to further improve its sound, long-term-oriented financial structure. The equity ratio on the reporting date of May 31st, 2014 was 30.5 percent. The available liquidity is greater than 650 million euros. By issuing a corporate bond in the amount of 300 million euros with a three-and-a-half-year maturity period in February 2014, HELLA refinanced early and at attractive terms its previously issued bond in the amount of 200 million euros, that is going to expire in October 2014. Also, HELLA expanded the financial flexibility for the strategic business development.

Contribution from international network strategy grows
Joint ventures with partners are a core component of the growth strategy. Joint ventures generated external sales of approximately 2.5 billion euros and earnings of 145 million euros in the past fiscal year³, which HELLA is considering in its consolidated financial statements according to the at-equity method. As part of the network strategy, HELLA has been bringing in its own expertise in joint ventures with strong partners for more than 15 years, opening up additional markets and opportunities for growth.

Expansion of technological leadership continued
In the 2013/2014 fiscal year, HELLA invested approximately 9.3 percent of consolidated sales into research and development. One important milestone was the dedication ceremony for the development center for electronics in Lippstadt, which provides space for some 700 employees and is contributing to the location's expansion into an international technology center. Overall, the international development network now constitutes approximately 5,800 employees. This represents round about one-fifth of the global workforce.

In this position, HELLA uses its leadership in technology to drive the central megatrends of the automotive industry: Environmental awareness, energy efficiency, safety, styling (LED) and comfort. Last fall, HELLA presented a new, superior generation of headlamps with systems such as the innovative Matrix LED system. "Technological leadership is our core requirement for safeguarding competitive advantages," explains Dr. Breidenbach. "It enables premium positioning and anchors HELLA as a core supplier for leading automobile manufacturers."

Globalization initiative pursued
As part of the globalization initiative, HELLA invested a net of approximately 380 million euros into optimizing the global organization in the 2013/2014 fiscal year. Further expanding the company's presence in international growth markets was one focal point, most recently aided by the opening of new, state-of-the-art plants in Jiaxing, China and Irapuato, Mexico. At the same time, HELLA pursued a strategy of continuing structural development of its location in Lippstadt into a global technology and control center. "We have increased the competitiveness and innovative ability of our global organization significantly," says Dr. Breidenbach.

Outlook for the 2014/2015 fiscal year
In the ongoing fiscal year, HELLA continues to pursue expansion of its strong market position and the marketing of leading technologies. In addition, the continuous increase in operational excellence in the global HELLA network remains a key focus. At the same time, the company is anticipating additional contributions to sales from its globalization initiative, such as from the ramp-up of the new plants in China and North America.

The company's stated objective is to continue the sustainable long-term development in all three business divisions. "We are pursuing a company philosophy geared towards long-term growth and performance-oriented professionalism," emphasizes Dr. Behrend. For the 2014/2015 fiscal year, HELLA aims for an increase in sales and earnings at the Group level somewhere in a mid-single digit percentage range.

¹Please keep in mind that the figures being discussed are preliminary and have not been audited. The audited figures may differ.
²Please keep in mind that changes to the basis for calculations have resulted based on IFRS 11 (Accounting for Acquisitions of Interests in Joint Operations). All figures for the previous year have been adapted to this basis to facilitate comparisons.
³As of the reporting date of May 31st, 2014 based on unaudited, internal management reporting