Thank you, operator. Dear investors, dear analysts, good afternoon.

Welcome to the Schaeffler Group fiscal year 2020 earnings release. Without further-a-do I'll leave the floor to Mr.

Rosenfeld, CEO of the Schaeffler Group. Klaus, the floor is yours.

Thank you Renada. Ladies and gentlemen, welcome to our annual analyst and investor conference.

That we do as in the previous calls in a digital format, you all have the presentation in front of you that we shared with you this morning and I would immediately go to Page Number 4 where you have the overview with my six key messages and the key numbers that you have certainly already digested. The year 2020 was a challenging year.

it was a test for the organization to show its intrinsic strengths that we can also operate under adverse conditions and do the right things and I think we have passed that test quite well. Sales are down minus 10.4% with a strong fourth quarter recovery 4.6% driven by all regions.

China again, an outlier with 10.3% in Q4 certainly something that's helped us not only on the automotive side but also on the industrial side. Gross margin and Klaus will give you all the detail, 23% and an EBIT margin on an adjusted basis 6.4%.

I think tells you that this is not a normal automotive supplier but the fact that we are more diversified hope this year to print these numbers. The sequential development in Q4 points to even higher margin but we all know that the swings in this during this crisis times are to some extent exceptional and should not be extrapolated.

Automotive Technology was the key driver for the strong margin print in Q4 and we can say also here that this first quarter looks like that we started into the year well. On a more strategic point, the order intake in Automotive Technologies was clearly below the year before, it was €10.2 billion, but we saw strong E-Mobility order intake of €2.7 billion, exceeding our target of €1.5 billion to €2 billion.

I think that's a positive message that shows that we are on track to gaining our fair share in this business. I can already say here, the quality of the order intake is as strong as the momentum going forward.

And we clearly see that the move into E-Motors brings us a lot of positive recognition. It's not only growth that clearly played a role in what we did 2020 and future growth, but the continued costs and capital discipline, functional costs, so what we are now using as a term for overhead, minus 12% year-on-year, headcount reduced by 5%, now 83.300 compared to end of the year '19.

If you see the numbers later on, that's nearly 9,200 jobs in two years and that does not include the restructuring program we announced in September 2020 with another 4,400 jobs. Capital allocation and CapEx discipline was strong.

You saw that we reduced the reinvestment rate significantly below one, as we promised, all the measures that we started to implement in '18 and '19 start to pay off and we will share with you later on how we see the year 2021 in that respect. Free cash flow was €539 million in the middle of the range that we shared with you when we updated the guidance in November.

So that's a good outcome and clearly, a point to be explained later by Klaus how that compares to the €100 million guidance. I also want to emphasis here already at the beginning.

We will propose to our Annual General Meeting a dividend for the common non-voting shares of €0.25. That is a number that is in line with our overall payout strategy.

You remember 30% to 50% of net income adjusted for one-offs. And if you calculate that through, you end up exactly at this €0.25 for the non-voting common.

Last but not least, I don't have to mention how important sustainability against, not only from a business opportunity point of view but also from fulfilling the commitments and following the rules. We are quite proud to say that in two years, we improved our CDP rating from a D to an A minus; that clearly shows progression.

And we also know at the same time how important it is to deliver, when it comes to a new taxonomy or when it comes to Scope 3, there is still a lot of work to be done. But the organization is 100% determined to make sustainability a top key topic going forward.

It is part of what we call the Roadmap 25, that's our plan for the next five years, that has been agreed and initiated end of last year was the basis for our Capital Markets Day and that is now in execution. So, a remarkable challenging year, but also a year where we showed that we can cope with such an environment.

Next page please, you see the guidance here. I basically already mentioned the important points and Klaus will talk later on about the details of outperformance.

Automotive Technologies down LVP by 16%, while we made only 11.3% means there is good and solid outperformance in the Automotive Technology area. All the other points I leave for you.

Then the next Page Number 6, is just a reflection of what we shared with you during the Capital Markets Day on the 18th of November. The strategy stands and the equity story has been updated.

We are clearly committed to accelerate the portfolio shift in E-Mobility. In aftermarket, we want to maintain a high margin and open up the business for more third-party repair solutions, and as Stefan explained, further enhanced profitability in our industrial business with profitable growth in the core business and entering attractive new growth fields in the industrial business.

Well, you see three examples here. The three examples don't mean that there are others as well.

They are just here to illustrate what I've just said. I said it several times, now, also in the press, we believe that Schaeffler is more than its three divisions.

We have no plans to split up the company, we rather believe in the synergistic benefit across the divisions. And we want to continue with operational discipline and relentlessly focus on free cash flow and execution.

Number 7 is the famous page, with a plus and minus with the highlights and lowlights. I also think in the interest of time, I can cut this rather short.

I've already mentioned the main important points, but let me stress again, we are pleased about the substantial performance improvement in H2, mainly in our Automotive Technology division and about the strong discipline. Clearly, we see that there is a way to go to until the crisis clears up.

There are headwinds that has also then led to this more cautious guidance. As you saw, high volatility of the end markets and the supply situation speak for themselves.

Let me go to Page Number 9 and also here to leave enough time for the detailed numbers. I would do this rather quickly.

On Page 9, you have the highlights and lowlights from the Automotive divisions. You see the numbers here.

I think what stands out is apart from the E-Mobility order intake, the 490 basis points outperformance in the fourth quarter across all regions, you see in the back up at page where you see all the details, that is then giving you per region the respective numbers, it's on Page 51 of the book that you have in front of you and greater China and Americas have been the main drivers here, as in the past. Let me go to E-Mobility, because that's for all of you clearly an important topic.

And you see on page number 10, what I just said, 2.7 billion order intake is above our target of 1.5 billion to 2 billion. You know that we have raised the target going forward to $2 billion to $3 billion.

What drives this is a good understanding that we are well into a sustained market position in 3in1 systems with major order intakes last year and good new orders being expected. The number of E-Mobility projects is rising, 30% more in 2020 over '19 and an increasing number in 2021.

The product portfolio has been expanded. And when I talk about new market segments, I'm referring to the heavy-duty area where electrification and also hybridization will come faster than expected in the last years.

We see lots of requirements from that areas and have already won an important order in that respect. And what drives all of this is the E-Motor competence, where we are very shortly before starting mass production also now, a new plant in Hungary.

Page 11 has a chronology here. I'm not going to go through all the details.

But you see what I just outlined, that there are some good order wins towards the end of the year, and have a new 3in1 hybrid module with an integrated Torque Converter. It's a premium European customer in the high-class segment and the heavy-duty nomination for an E-Motor is also a top win.

But as you see from this timeline, there were also good wins on the battery electric part with the 3in1 E-Axle and also nominations for other E-Motor and key elements of electrified powertrains. Let me stress here the importance of terminal management.

We have not made that a big point in the past, but we see that switching from ICE to E-Mobility and perhaps that this product becomes more and more important. One last page on E-Mobility, Number 12, that's the latest win in the E-Mobility area where we're very proud of it's a 3in1 integrated system with a micro-Torque Converter improved power density where we're building on what we invented in the past.

And this is probably the most sophisticated model that we've done before. It will be used also to demonstrate our modular strategy not to reinvent at all the time new things but, building on what we've done in the past.

And that's more efficient and also more interesting from a capital deployment point of view. 13 is, Aftermarket.

Stable sales development in Q4, as you saw from the numbers here the gross margin is more or less the same. EBIT slightly down but with 15.8% clearly a strong margin.

The volatility during the year is well known to you. What I can say is, we're quite proud that the initiatives that Michael put in place have paid off and helped us to also bring the business back in the second half.

One of the key initiatives is on Page 14. The Aftermarket is a special business.

It's not only an Aftermarket business with some replacement products, but it becomes more and more a digital business. Digital competence is the key going forward if we want to win in this.

During the pandemic, all digitalization aspects got a boost and in the Aftermarket, it is clearly a driver as well. We have started to implement a state-of-the-art integrated ecosystem here, centered around a separate Schaeffler Aftermarket cloud, that serves as a one platform for online activities and customer services.

Mobile apps play a role. What is key to us is this virtual online training.

Those of you that have been in Berlin some years ago and saw how rep experts works, can imagine that this can make a good difference and a big difference compared to our competitors. Let me go to Page 15.

That's Industrial, you all know the Wind story. Double-digit growth in the sector cluster was clearly a main driver.

China at the forefront here. More than 30% growth in this area is difficult to repeat.

However, we are optimistic on the Wind sector, it continues to grow. And will drive our business forward.

At the same time, there are first signs of recovery after a negative growth environment in 2020 in Two-wheelers, in Offroad, and in particular in Industrial Automation. That is an area where we see apart from Wind, great opportunities going forward, also when it comes to synergistic potential with auto.

OPTIME, our little condition monitoring service is very well accepted by the market and we also launched it now in China. Still, the year 2020 was a year where the utilization of the plant was let's call it heterogenous with negative production cost impact and going forward, we all know that there is work to be done to capture with our main competitors in the bearing space, [indiscernible] what is very important in for Industrial, is that we get our restructuring and improvement program in execution.

I can say already at this juncture, we are in good conversations with our worker's councils. We have announced as you know in September, it's now, end of February beginning of March so, more or less six months behind us after the announcement that's not unusual for German conditions and I do believe that in the next weeks, we'll close these negotiations and can start with the restructuring implementation.

Order book Page 16, recovers clearly points to some secular growth in Wind, but also, as the diversified portfolio provides for balanced growth opportunities. I already mentioned the areas.

And I want to stress again, the importance of industrial automation in particular, when we want to make use of the more digitalization environment going forward. You see this on Page 17, a little deep dive here, signs of recovery, and robotics with this specific speed reducer transmission for cobalt joins, that is a great opportunity for us.

It's interesting to see if you see the order book for Industrial Automation, with a three months perspective, minus 30% in January 2020 and now back to plus 3, one bird doesn't make the summer, but we clearly see that this is going to develop positively in the future. And I already said, this is an area where we can demonstrate technological synergies that makes sense to both Automotive and Industrial under one roof.

Page 18 is the one on the cost management. As I said before, 9,200 people down nearly 10%, you see here, the year ends and also June.

So, a good progression. And you all should recognize that this is a function of the restructuring programs of the past.

The ones that we announced in September are not part of this, it goes across the organization. But you also see from these numbers, that the predominant part is outside Germany.

So, tackling that area now with the additional program is important. And I feel strongly that we are on a very good track to harvest what we planted.

Transformation cost, Klaus will give you more detail on this was €700 million announced, clearly doing in half a year negotiation, certain things change, but the overall direction is clear. Now, let me use this page also to put the restructuring a little bit into context.

I mean, you all know that we booked the provisions more or less in 2020. And that the payout is now expected for '21 of the years to come.

You see this in the backup when we come to what's expected for '21, that's the number somewhere between 300 and 350, that also may help you and Klaus will give more details to position the free cash flow guidance in the right manner. Just add this back in you see that, that is a very simple calculation 100 plus let's say 350 is 450.

And that's a number when you'll go back the years that we always had in terms of a historical free cash flow performance. So, while the 100 as a figure may sound low, it is definitely not comparable with the 539.

In any case, you need to include and add back the restructuring payout for '21. Now, let me go further to Page Number 19, capital allocation.

I think, I already mentioned the most important points. €632 million CapEx leads to a CapEx ratio of 5%.

4.2% in the fourth quarter is clearly at the low end, but the reinvestment rate of 0.7 is what we indicated. And we see as you also see in the backup that the number will rise, but we will manage this very carefully.

The CapEx allocation also between the regions is important and Automotive Technologies will have to demonstrate that we are investing in the right areas, the material business is well invested. And the investment intensity in E-Mobility is, as you all know, lower than in the traditional business.

What is key is the footprint going forward. And footprint is a continuous task for optimization.

So, I do believe that we can also in next year, very well operate with the €800 million that is indicated, 20th and my last page before I hand over to Klaus on sustainability. Already said it, there's much more detail in our sustainability reports.

We are proud of about the progress we made, but we equally accept that this is a big obligation for us. And that we need to deliver on the top goal carbon neutral production in 2030.

We've added a new goal, also to demonstrate not only CO2, but also other areas. 20% reduction of freshwater supply is also key.

And I can once again assure you that we want to be a good example for a company with a long-term view that takes this very serious, and delivers on what it's promised. With this, I hand over to Klaus for the financial results.

Yes, thank you, Klaus. And we go directly to Page 22.

On revenue, I think, basically, main things have been already explained. The fourth quarter was a quarter where we have seen growth again, both nominal and also FX adjusted nominal was 1.2%, FX adjusted 4.6%.

Klaus already mentioned, the strong contribution of China actually what you can see on the lower right-hand side is that, there was growth in China. FX adjusted of 10.3% also for the full year, it was 8.7% and that had to stabilize margins also in Q4, but also in the full year.

Next page on gross profit, you see that we have delivered 961 in gross profit, which translate into a gross margin of 26.5%, 300 basis points up compared to the prior quarter. You can see in the bridge that obviously volume helped, but helped to the mix.

The negative mix was quite low, that includes what I mentioned on the region. Production cost was significant positive here in this €150 million benefit and that is due to specifically the Automotive Technology Division, where we have a combination of a high operating leverage that means cost digression.

We have in addition, effective cost savings in the plans, and still a bit of short-term work while that has come down compared to the third quarter and significantly to the second quarter. And also, what contributed to the margin is a significant inventory declined, that means, sale from inventories and also still low material prices.

Next page on the Functional cost, that means R&D and SG&A for the year down 11.9% that means, basically in line with the nominal sales decrease of roughly 12% also fourth quarter down 7.4%. If you look at the different functions, you see that there has been now an increase in the selling area both year-over-year but also specifically compared to the third quarter.

That is a reflection of the increase in revenue and in addition kind of over proportionally, we also have some kind of special freights in order to get the products out in time to our customers, a topic which will also we see in 2021. The administration expenses decreased.

Obviously, that has something to do with lower personnel cost, but also a lower consulting or other kind of purchased cost for 2021. As mentioned also in the CMD, we will have the first impact from the preparation of the S/4HANA switchover.

And that will then impact specifically here the admin plan. Next page on EBIT.

You see on the left side, the EBIT in the fourth quarter on an adjusted basis was €418 million with an exceptional 11.5%. On the lower right-hand side, you see that this increase basically, exclusively comes from Automotive Technologies.

Automotive Aftermarket was down a bit. I come to that later and Industrial was also down a bit but sequentially up, because third quarter margin was at 7%.

Now, if we go to the next page on Automotive Technologies, you see that and E-Mobility, our top line raise did quite good with 12.2% FX adjusted growth. Also, the Transmission business, which is very - also a good margin business for us, increased by 10.3%.

And Klaus Rosenfeld also mentioned the outperformance, which was for the quarter 4.9%. But also, and you see that on the lower left-hand slide, outperformance for the full year was 4.5 percentage points and for 2019 in a similar range.

And in both years, as driven from Americas and Greater China. On the right-hand side, on the EBIT bridge, you see gross profit was the main driver of the EBIT improvement due to the tailwinds.

As mentioned before, in Automotive Technologies, there were stable savings in R&D and in administrative expenses and on the other hand, somewhat higher selling expenses, mainly driven from the higher logistic costs, which I mentioned earlier. And on Automotive Aftermarket, on the next page, you see the split of the 1.3% FX adjusted growth, mainly driven from the Americas, was close to 10% growth.

Channel wise, the main contributor was from an absolute number point of view was the independent aftermarket, which is, of course, much larger than the OAS channel. On the right-hand side, on the EBIT bridge, you see that the gross profit was down €2 million.

That includes some negative FX effect of €14 million and then the R&D expenses and administrative expenses, they were also down, including some FX effects. And then you see the selling expense expenses, which have increased by €7 million.

And that is exclusively due to the higher to the actual spending, the logistic costs from our warehouse consolidation program, which had an expense in the fourth quarter of roughly €8 million. The minus €4 million on others is just a consequence of higher special items in the last fiscal year in the fourth quarter.

Next page on Industry, decline of minus 2.7 FX adjusted, again, with despite a strong growth in Greater China with 12%. And most of the sectors in the meantime in China have been positive or have shown positive growth in China in the fiscal year.

If you look at the overall worldwide numbers, as explained earlier, Wind was growing for all the quarters, then power transmission in the second half and now in the fourth quarter that has been joined by Offroad and Two-wheelers. On the EBIT side, you see that the gross profit declined somewhat.

And that is driven by volume and also from FX. And on the other hand, there have been also volume related, but also structural savings in the selling area and also savings in the administrative area.

And again, the minus 12 you see in others, that is the consequence of higher, special items in the fourth quarter 2019, which I reversed in that column. Next page on the net income and on the special items, if you look at the left-hand side, EBIT as seen on one of the prior pages was €480 million before special items in the fourth quarter, we had special items of €148 million and that is a combination of roundabout €95 million from the measures which we have communicated in September.

Then an additional close to €40 million for another restructuring which we initiated in South Korea, which is also a high cost for us, and also another round about €20 million for a legal matter. If we look at the - if we stay on the on the special items for the full year, you see that on the lower right-hand side, €946 million obviously, that includes also the goodwill impairment of the first quarter.

And the yearly restructuring expenses have been €680 million roughly and then out of that, the big pieces have been €580 million for the program, which has communicated in September and the roughly €40 million for South Korea, I mentioned earlier. On the financial side, on the left side in the bridge, the €72 million includes roughly €40 million for the refinancing exercise, and there the big portion is the realization of the early redemption option of the high yield bond.

And the income tax is basically driven from current income taxes, negative ones mainly from U.S. and China compensated by some by different taxes in an area of, in a smaller double-digit number.

Next page on, again, on the profitability here. It's not allowed to add.

The adjusted net income was €325 million for the full year, that has been the basis for the proposal on dividend and the respective fourth quarter number is €209 million, also up from the prior year quarter. Cash flow, on Page 31 was strong with €355 million for the quarter and even up compared to the prior year quarter.

And that is basically also driven the €355 million from a release of working capital, reduction of net working capital, specifically on the inventory side, to a level which is also in our not too low in order to secure our delivery capabilities that will now reverse going forward. For the full year, free cash flow was €539 million, up €66 million compared to the prior year.

Now, on my last slide, on net debt, there has been an improvement in the second quarter of delivered, there has been a peak in net debt and leverage in the second quarter, and then an improvement in the third quarter and also in the fourth quarter. We now are with the leverage ratio of 1.3 already in the range of our mid-term kind of target, but in the mid-range of our corridor, which we have explained.

And you see also that on the right-hand side that we have no major kind of maturities, which are not pre funded until March 2024. And the liquidity situation is strong, with €1.758 billion in cash and cash equivalents and an available liquidity of 28% of sales.

And with that Klaus, I would hand it back to you.

Thank you very much Klaus. Let me finish our presentation with the last three pages.

And we have given the environment that we are experiencing extended a little bit on our outlook going forward. That's on Page 34.

I think the most important part of this trip to shown is, on the left-hand side you see what we assume for light vehicle production growth in 2021. We all know that the February IHS figures give us an estimate of 84.6.

And we have discounted this number to come to a solid base by 5 million cars that equals then 7% year-on-year market growth. That's at the moment our baseline.

And clearly, this is a cautious estimate due to the remaining corona crisis uncertainties, the risk of supply chain disruptions, but also the global volatility that we all experience. So that's our baseline.

Then in Automotive, Aftermarket, Industrial, you can't use such a figure. We have, as you saw from the mid-term targets, used proxies here.

One is the GDP number and one is the industrial production number by way of a basket that is relevant for us, and that has given us then the basis for Automotive Aftermarket and Industrial. Also here, I think we are well advised to be rather, on the cautious side, we have used a midpoint as you see on the next Page 35 for the two divisions.

The key numbers have been absorbed above 7% growth. Sales growth is a function of the number for our technologies with an outperformance assumption of 200 to 500 basis points in sync with the midterm targets 5 to 7 for Automotive Aftermarket and 4 to 6 for Industrial, gives you above 7.

On the margin side, we have decided to give you flows. These flows are absolutely there to be defended, whatever it takes 4.5, 11.5 and 8.5.

We all know that we can do more. And we will do our best to overachieve that.

That, at the moment then altogether leads to a margin range for the year of six to eight. And free cash flow as already been mentioned is around 100.

So that's the guidance. Let me stress again, it's based on cautious market assumptions.

But we are confident that we can overachieve these flows. Last page with a summary.

I'm not going to repeat everything that we said before. But let me stress again.

Our performance orientation is clearly 100% committed. We saw that the organization is able to absorb environments like the one we saw in 2020.

The intrinsic strength of the company is its management team and the ability to manage through something like this with a clear ability to manage contingency on the one hand, and on the other hand, setting the course for the future. We will remain focused on execution.

We know that a reliable track record counts in particular these days, and there is clearly value to be unlocked if we stay the course, and if we focus on solid operating performance and cash generation, the Roadmap 25 is a framework for this. And we will demonstrate to you that we will be able to leverage synergies between the Automotive and Industrial divisions going forward in all these areas like clean mobility, or clean energy, this is the way to go.

And we now come to an end and look forward to your questions.

Thank you. Akshat, from JP Morgan.

Two from my side please. The first one on your free cash flow guidance and low conversion ratio on EBIT of close to 10%.

So, when I look at the details on your slides, you have a lower reinvestment rate of around €200 million, the delta between CapEx and D&A. And I understand that there are restructuring cash outflows of €350 million, but that still leaves me with close to €500 million in free cash flow without any working capital outflows.

So, I'm just trying to understand how you're thinking about the €100 million guidance in some more detail? That's the first one.

And the second one is on E-Mobility and Automotive gross margin. E-Mobility sales were somewhat lower year-on-year in FY 2020, despite close to 45% growth in electrified sales, or volumes across your key markets.

Can you just shed some more light on that division and if you have any sales target for us for the E-Mobility division in 2021 and 2022, like you used to give the 2019? And the last link question to that is gross margin.

And as you start delivering these higher E-Mobility order into 2021 and 2022 should we expect any significant start-up costs or margin dilution? Thank you.

So, you do the first one?

Yeah, of course. Yeah.

On the free cash flow side, how I would look at that is, and you also started I think on the, with the €539 million free cash flow, which we have delivered in the last fiscal year right. So, obviously, we expect that we have an increase in top line and you saw the guidance of above 7%, but please consider that there is a negative impact from FX that means, the overall top line will be growth will be somewhat slower.

But whatever it is, in the end it will be a significant figure, and then if you basically want to come from this additional top line, then you be - I would then start to use a drop through rate of roundabout 30% to 35% which brings you to the EBIT and then in the CMDB guided for a free cash flow conversion of 0.3 to 0.5 and please keep in mind that free cash flow for us is an after-tax amount right. So, that gives you obviously, as a starting point, an additional free cash flow, but then, I think that on the topic of working capital and we have a specific view on the inventory side, we have a very low starting point and there needs to be some kind of refilling there which I would say should be round about €100 million on top of what is already kind of calculated within this free cash flow conversion ratio.

And then there is then I would assume, until you have all the numbers in the deck that there is higher restructuring cash out, then what we had in 2020 that will be a number of €150 million to €200 million and then there is a CapEx increase of I would say €170 million to €200 million. So, and if you calculate that, then you come close to the round about 100.

So, to sum that up, on the one hand, obviously, there is a drop through on the after-tax report in free cash flow, but on the other hand, there are negative impacts from an inventory normalization, higher CapEx still below the previous numbers from '18 and '19 and then there is this higher restructuring cash out. And with that, I would give it to you Klaus on the E-Mobility top line or should I say something about on the automotive tech --.

If you want to extend on the gross margin.

On the gross margin, well, indeed on the Automotive Technologies side, there is an ongoing dilution from the growth, in profitability from the E-Mobility business right. That is there, we have basically included that in our midterm targets already.

And also, that obviously, what that is included also in our guidance for this year, so, it's nothing special to be expected there. There will be sequential progress on the E-Mobility and the traditional business specifically with the increasing volume will be able to kind of compensate for that, and therefore, we said, that the EBIT margin of overall Automotive Technology will increase compared to what we have in 2020.

Klaus?

And I think on your first question, on the second part of your question, I'm not 100% sure whether I understood correctly what you are referring to. I think the gross margin was answered, but can you repeat the second part of your question in terms of, I think it was gross, but I didn't get it 100% here.

Sure. Yeah, I was talking about the E-Mobility revenues growth in 2020.

So overall, sales were flattish despite market volumes in your key markets being up 45%. I was just asking if you have going forward, if you have a sales target for us for the division in 2021 and 2022?

Thank you.

Again, we have we have not given any targets for E-Mobility growth as part of the mid-term targets. You always have to understand this E-mobility composition is not only EX, but there are some also existing products in that.

I think the latest what I can refer to is we said sometime in the past that the CAGR in this business can be somewhere around 15%. That was a UBS event, I'm not mistaken, sometimes September.

But again, there's no gross target as an absolute number for the E-mobility thing. What we're giving you is the target for order intake, and that has been increased.

So that's what I can say at the moment here.

Thank you, if I can follow up on the gross margin question, just one follow. Klaus, you mentioned that traditional businesses with increasing volumes would be able to compensate for the margin dilution from the E-Mobility business.

How confident are you on that front that we won't see more margin pressure on the traditional business lines, engine and transmission?

Maybe I can say one sentence and then Klaus can add from the numbers side. I mean, we are seeing at the moment an interesting situation.

All the OEMs are articulating their electrification strategies going forward. And what as everyone says he wants to redo the product portfolio and everything becomes electric, whether it's full electric or hybrid included.

At the same time, we're seeing a situation short term where people are buying cars are not enough battery electric cars available. So that gives us an interesting situation because they come to us and also ordering in some areas even more than we expected for traditional cars.

And that gives us to some extent, also an edge, because I'm not saying that our pricing power will completely reverse, but there is a situation where we can also argue with customers and say, on the one hand, you want us to transform to E-Mobility, on the other hand, you want us to keep the capacity open for all the traditional stuff and that comes at a price. So, the situation slightly changes with OEMs becoming so articulated on their electrification strategies.

And we've always said last in the Capital Markets Day, that our material business, or we call it our Foundational business, is not just a run-off business. It has a lot of technological things that we can use for E-Mobility as well.

And it's definitely something that we will harvest. So, we are - and Matthias and his team is focused, on the one hand, growing the E-Mobility at good gross margins.

On the other hand, to harvest and use the cash that sits in the existing business as wisely as possible.

Hi, thank you. Gabriel from Citi.

Two questions for me, please. The first on the market outlook and your assumption of plus 7%, which I understand the rationale for being cautious here.

But my question is more whether there's anything that you're seeing maybe in the current trading and in February or with regards to conversations you're having with customers around perhaps shutdowns related chip shortages, it's informing your views here or you're just a prudent and cautious take on an outlook that is clearly volatile and uncertain because of the shortages and the strength of recovery? And then my second question is on the industrial margin.

Can you just help us understand what really is holding back a recovery in the industrial margin in 2021? Because revenues are growing.

The order book recovering, headcounts falling, and then you're guiding to margin soft of 8.5%, which is only modestly better than what you achieved this year. And, of course, is some way off the 12% to 14% target you sent out of the CMD.

So, any color you can provide around why you're not expecting a stronger margin recovery in industrial in '21 would also be helpful. Thank you.

Well, let me start with the first one, and I think you all will agree that we are at the - hopefully at the end of an unexpected and unprecedented crisis where no one of us has a crystal ball and can say how this unfolds. We think it's starting to clear up, but we're now seeing this chip shortage that has only indirectly to do with the crisis, that is something where Schaeffler as such is not that impacted compared to others, but it will impact demand going forward.

We don't know how much and how strong that will be. We also see the uncertainties from other elements in the supply chain.

And therefore, I think it's more than prudent not to go with an overly optimistic perspective now into the New Year. Yes, we see that at the moment, there is a positive development in January February, but the year is not over.

Growth rates at such, you have to be look against the deep dive in the second quarter 2020 for sure. But, again, I can only say at the moment, from our point of view, it's prudent to be rather on the cautious side.

We've explained to you the logic with this discount, others have done something similar. And I think that's the right way to start and to see how we move forward.

As I said, this is about agility, it's about having the right information available and draw the right conclusions when necessary. I can say for us as a management team, we are optimistic for the year.

We are not saying that this will be not be another chaotic year like 2020, but it's better to be careful than overly optimistic.

Yeah, on your question on industrial and the margin. So, first of all, I think that we have to just be clear that we do not expect the same overall top-line compared to again like in 2019.

So, there was a decline in 2020 of minus 9%. But remember that FX adjusted and we also guided for growth in line with the industrial market.

But also here, we expect a negative FX impact, that means there will be - there might be a difference of whatever €300 million €400 million in top-line versus 2019. So, first topic.

Second topic, I think also, we made it always clear that in the end, there needs to be structural improvement specific goals in Germany on the production side, because there is a very large production base in Germany. We have addressed it with the measures which have been communicated in September.

And at that point in time, we already said that the payback from these measures will not be effective in 2021. They will start to be effective in 2022 and then basically, in 2023, we said, we will have around about 90% of the savings which we have - which we expect from the whole program.

And therefore, it's basically a combination of working on the structures and improvements will come there. And then it will also take time in the industrial space until the pre-crisis level will be reached.

Okay, thank you very much.

Maybe I add one sentence. You see the gap from today to the 12% to 14%, in 2025.

That's the journey that we have in front of us. And when you think about the measures that we implemented, then they will significantly contribute to that journey, but not in '21.

As Klaus said, it's a progression. And therefore, it's for us of utmost important that we get these negotiations, our workers council settled.

They are on a good way. We have - as you know, good and cordial relationships with them.

And I think that this will pave the way for this execution path.

Good afternoon, everyone. Thanks for taking my question.

Unfortunately, I have the follow up on the guidance as well. Just so that I understand correctly.

If we assume kind of the low end of your top-line guidance for each of the division and that's when you think you will reach this state of margin kind of the bottom end. Is that the correct reading of the guidance?

That is - no. Say it again please Sascha.

I don't want to say something wrong.

Yeah. So, for industrial and aftermarket, you gave a range.

And then similarly for automotive in the sense of 7% market and 200 basis points of outperformance that when we should assume kind of 4.5, 11.5 and 8.5 range?

Correct.

Okay, perfect. And then my question a bit of a follow up as well.

I mean, if I assume aftermarket or industrial at the low end, it would basically imply that EBIT is unchanged for industrial despite higher top-line even at the lower end. And for aftermarket, it's down €40 million or so, which basically also means, the AKO headwind for it's completely through and there's no offset from your incremental top line.

Just trying to understand why this is the case given, you have so much restructuring in place?

Let me, first, come back to your starting question. I think, principally that's true, our guidance of above 7% top line that is based on the conservative market view and Automotive Technologies, some outperformance in the range we gave, which is 10, but also not a more on the lower side and then I'm also considering a conservative market view on industrial automotive aftermarket.

So, that is that I can confirm. So, then, the other topic I understood as a question, but it's on the automotive aftermarket specifically why we are improving not - why are we declining in margin so strongly.

And indeed, there are positive volume effects on the gross margin, but they are more than compensated by mainly three factors. First topic is higher production costs, including higher production costs mainly from our internal supply from Automotive Technologies.

And the second one is that we will have as communicated earlier, for the AKO we will have an impact, which is in the range of €32 million in 2021 that is significantly more than what we have in the year 2020. Here, there is, I can give you a number of roughly €12 million, the majority of that was in the fourth quarter.

So, if you take this logistic topic together with further investments in digitalization as mentioned and explained from Klaus, that is good for roughly 2 percentage points. So, roughly 2 percentage points for higher production cost or cost for goods, 2 percentage points for AKO and digitalization.

And then we also plan with another negative FX effect, which might be in the range of 1.5% for automotive aftermarket. And well together, if you take it together that explains you the drop in profitability.

Keep also in mind, the 11.5%, which we put as a guidance that is a floor again, right? For example, that also considers that there is potentially a faster increase in revenue on the Automotive Technologies side, which would, in the end, potentially limit the growth in the automotive aftermarket business, because they would then not have enough goods to ship.

So, it's really something which, again, as Klaus Rosenfeld said, this is what we think would even be defendable in such a scenario.

Perfect. That's very clear.

Thank you. My second question would be on the EV order intake which obviously gained quite a bit of momentum.

I was just wondering, if you can just logically speak about, do you think kind of that phase of order intake is enough midterm to offset kind of some ramped down in your legacy portfolio? Or do you think kind of mid-decade, you really need to step up and kind of go above the €3 billion level in order to offset some of your legacy products, that might fade down a bit faster than initially expected?

That's a good question. But for the time being the range has been increased to two to three, not because of any offset ideas, but simply because the number of requests increasing, the number of projects we are running is increasing.

And we need to just be clear that we want to be selective in our approach. And we want to be modular in leveraging what we have done in the past.

So, this is not just getting on-board, whatever we want. And whatever may look interesting, it's a selective approach to build a portfolio in those areas where we can make a difference.

And it's not only quantity, its quality of the order intake, and it's the ability to leverage the core competencies across the spectrum.

Thank you. My last one kind of a related question.

If we listen to the presentation over the last six months or so. Everyone is talking about in sourcing more of the EV power train different areas, but overall, the tone is more towards in sourcing.

How are your discussions into that sense? Do you feel the OEMs go more to like a component relationship that they want more components of that system?

Or is that a misperception, and you still kind of have a lot of systems that go into the OEMs on the EV side?

No, Sascha it's a fair question. And I would be foolish to say that this is not a critical issue.

We have seen large projects that we wanted to win that went away and were done in house. It's a relevant point that we need to deal with.

The answer to this is, from our point of view, that you need to be good with the 3in1s and with the more system like offering but also be able to offer the components because certain components are difficult to do in house. And if you then think about the margin profile, if there are parts, and it could even be an E-Motor, there are companies that said we want to do with Schaeffler the E-Motor because they can do it better than we can.

And don't forget an E-Motor, a row tennis data is nothing else then high precision metal sheet forming and packaging. And that requires investment if someone wants to do this in an efficient manner.

So, the answer is not black and white, there is this extra competition from the OEMs themselves. It doesn't sort of allow us to do anything, but it's something that we need to take serious.

And our answer is, again, a modular approach, but also approach that does not neglect a component into something bigger. And so far, that has gone well.

I think the best proof is here, this E-Motor strategy, where a very prominent OEM where I can't mention the name, already, a year ago gave us this large order, and said, we want you to build that for us. And when I look at the number of projects that we are dealing with at the moment, then this becomes a theme going forward.

I also mentioned that this morning in the press, there are products that we have built a certain competence for in the ICE space, that will be used much more in the battery electric area. Thermal management is a good example.

I think some of the analyst studies already talked about this. So, the spillover effect that you can also use.

And so, it's still a race, for sure. But we are in a much better position than we have been two years ago.

Perfect, that's very clear. Thanks for all the color.

Thanks.

Good afternoon. Thanks for taking my question.

And the first thing I wanted to ask was around your relationships with all of the various start-ups that we're seeing in the EV space? Could you talk about, what is your conversation like with them, both in terms of E-Mobility products, but also elsewhere in auto OEM?

And then just a couple of housekeeping ones, on your expectations for the net interest cost and the tax rate for 2021? Thanks.

Okay, the start-up question is an interesting one, there are all sorts of start-up experience from the past. And we have I think, if I may call this a start-up, at least some years ago, it was a start-up, the only one that has really made it so far is Tesla.

And Tesla has a very specific approach to things, you know this better than, than I do, all the other ones from the past have not really succeeded. I'm not saying that this will be the case going forward, that would be wrong.

We are approached by always by these companies. And in particular, when it comes to the luxury space where the profit pool is larger than in the low end of the spectrum.

And we always sort of like to talk to new companies, understand what they want. But for us, we built our business around the idea that scale matters.

So, it becomes then a discussion about where can we add value and where does it make sense to design something that is completely new in particular, if you want to leverage that experience. There is a whole range of new companies in China, our Chinese organization is engaged with most of them.

But again, you have to be selective in saying where do you really want to talk and where do you really want to put money at work? So, again, it's a selective approach by looking carefully, there are no miracles.

What we are seeing at the moment from Tesla in China is an aggressive approach, quite impressive. But they are obviously putting their price strategy at work with a great reputation to build inroads into the E-Mobility space there, with raising the bar also for service.

So that's quite interesting to follow. But again, on the more unknown companies we talk, but we are selective in terms of putting real money at work.

Yeah, that's really interesting. Thank you.

And actually, I wanted to also pick up on before that the more boring questions were boring, but important questions. To your point about scale and in E-Mobility, either a lot more components in your E-Mobility product portfolio where they're are much more standardized basically than you would have for ICE.

Is that something also that you think about in product development and in how you sign contracts?

Well, I think, Victoria, if you break down best car, the composition of the built of material is definitely different than in ICE car. Doesn't mean that there's a different degree of standardization when it comes to all components, not necessarily.

You can say a complex transmission with a 10 gear transmission needs probably more bearings in the transmission. But if you have a complex E-Axle with an inverter, with a reducer, some of the complexity is replaced by something else.

So, I'm not saying you can just extrapolate the whole complexity of the, let's say, engine valve train components into an E-car, but there is definitely not a notion that says everything is easier in an E-car. That's not the case.

In particular, if you go to the high end, high voltage segment where we think there is all the transmission or how that we have, all the system understanding that is needed is very relevant and also extending that into a power electronics and E-Motors. So, I think this simple notion of cars are more standardized and that's why you're losing value is at least not right for the high-end sophisticated E-Mobility product.

And I do believe that that's the area where most of the companies will make money. And the smaller cars, the ones that you drive with low voltage, they have probably a different situation.

Yeah, thank you. Actually, it wasn't so much the sort of the easy the much simpler than ICE that I was thinking about.

It was more that, to your example of the density transition. Your density transition for one OEM customer, I assume it's really quite different to the similar product, but for different customer or even maybe on a different model for the same customer, but in the hybrid modules or in E-Axles, in E-Motors, the difference between one E-Motor for one OEM is less.

And to the same product for different OEM. Do you think what I'm going from basically, how scale can be different for you, for E-Mobility?

Sorry, Victoria I misunderstood the question. That's what I wanted to say when I talked about the modular strategy.

For us, it's vital in terms of intelligent use of our capital that we don't reinvent for every project a complete new set up. We have certain competence, as you, in hybrid systems in terms of how to make them and how to make things smaller.

The old Ford MHT example is a great example that we extended into other things. We've just one another hybrid system for a Japanese customer and the U.S., where we're basically using that concept and extending that concept.

If that's what you mean, then I think we are on the same page. And that is from my point of view of vital importance in terms of making money with this stuff.

If you try to reinvent the wheel for every customer, you will not be able to make money on this.

Yeah. Great.

No, thank you.

Okay, and then on your question on the tax rate for next year, we expect 30% to and roughly 34%. And if your question was more on the cash side, I would expect a similar amount of cash out from tax as in 2020.

So, we talk here, €310 million or something like that, this in the range. Obviously, that's depending on where the profitability comes from and includes also the assumption that in the next year, there is high profitability in our companies and abroad.

And on the interest cash out that would be somewhat higher than what we had in 2020, including somewhat higher interest on the bonds.

Great, thank you very much.

Yeah, good afternoon, and thanks for taking also my questions. The first one that I have relates to the top-line guidance in Automotive Technologies.

I mean, you gave a wide range versus 2% to 5% outperformance. I want to understand what does it depend on that is 2 and in which cases is 5?

They are same towards end of last year rather at the upper end of this range. So maybe could you explain that a little bit what it depends on?

Let me try to give you some color. If you look at the page in the book with the historic outperformance, you see numbers that are inside the 2% to 5%.

And I think what we can say then from a regional perspective, you see that there's some volatility. More stable number is Americas.

If you go back four quarters, Americas was always positive in terms of outperformance sometimes two digit, sometimes only high single digit. But all the other numbers can fluctuate over the quarters.

And we think that 2 to 5 is a solid range that we can deliver. The outperformance depends on are you on the right platform with the right product?

I can tell you if we sell this MHT module that is a high content vehicle continuously well, with our major U.S. customer because people buy large SUVs and pickup cars that will drive outperformance.

If you're in something that is not really performing well, because the customer can't sell the product, then that can be negative. So, it's a function of what type of platform, what type of car, and what is your content per vehicle in the ones that are running or in the ones that are not running.

Okay. The other question -

Does that make sense?

I have to think about it in more detail to be honest. And maybe get back to you on that when I'm finalizing my estimates.

But I mean, regarding this -

But can I say there Horst, the question is from my point of view, not so much the outperformance. The question is what's the underlying market and production number?

And here we said taken a discount 5 million cars that incorporates all the headwinds that are there, whether it's the demand curve, because of the shortage of chips that is not that relevant for us from a supply side, but that it can be relevant from a demand side. So if you think about growth in Automotive Technologies, it's very much a combination of a decent outperformance number and the volatile production volumes.

Let me just ask a follow up on that. Once again, your content per vehicle, in which region is that highest?

That's a number that I don't really need to go back to the file to look at this, but that's not a number that we have.

Content per vehicle is the highest in Europe. And I think that's also a reflection of the outperformance.

If you look at the 2019 and 2020 numbers, you'll see that in Europe, the outperformance was smaller, but that's also a reflection of the high content per vehicle there. So, I think, as Klaus already mentioned, there is also a kind of regional kind of momentum there and we had strong outperformance because there was strong growth in China and also in the United States.

Okay. But again, on the longer term because I know you also guide midterm 2% to 5%.

I think I asked this question also in November at the CMD, what is the past for this outperformance? Is it right to assume that it should be rather higher in a year like maybe 2021?

They've got special circumstances. And then maybe it levels off in '22 '23 and then it accelerates maybe, or maybe even declines in '24, '25, when we move much more towards the EV?

Again, we can take that question with us and see whether there is a pattern but what we gave you is an on average indication. And I think I've not seen anyone who gives the walk, in terms of outperformance through the years.

Again, it's very much dependent. Don't forget this business is a consumer business.

It depends what are the consumer buying and even if there's a big talk about electrification these days, and we think that's right, that there is this conversation about electrification and that OEMs are going this direction, what the consumer does in 2021 remains to be seen.

Yeah. Sure.

Then the other question that I had that relates more to the seasonality. So how should we think about the way through 2021?

It's fair to say that H1 going to be weaker than H2 or there is no special seasonality that you would expect?

Weak in terms of what? In terms of growth or in terms of profitability?

If you can comment, then certainly on both. Yeah, I mean, I see the right production numbers, of course.

So, I think for January, February, equity trend, but then I don't know, for EBIT margin?

I mean what I can say at the moment is we started well into the first quarter. And that, to be a little bit more explicit, that means at positive growth rate.

And you all know that in the first quarter, there was already a decline in China starting earlier than in the rest of the world. In the second quarter, you will definitely see significant growth rates because of the low comps.

And how this then progresses into the second half of the year is a function of what happens with this crisis. I mean, if the crisis is over, don't underestimate.

There is I mean, always some, these support programs that now come through in the United States; we already see inflation expectations rising. We don't know how people will behave in the second quarter.

So, it's crystal ball Horst. I'm not - I can't give you something that now says I'm confident that the second half is more growing faster than the first.

I think in terms of growth rates, you need to factor in that the comps of the previous year of 2020 will play an important role when you determine growth rates.

Sure. I mean, anyhow, year-on-year growth rates, I don't know if that perspective is useful.

Maybe we should more talk about sequential growth, right? And then, I mean, forgive me this question.

I really like a conference call the statement that you make an aftermarket, where you clearly explained how you get to the closest margin. When I look at Automotive Technologies, I have not yet fully understood why just more than 4.5% understand you want to be cautious.

But then when I look at the margin, of course, it is in Q3 and Q4? And then I look at the total level of production volumes globally in Q1, Q2, Q3, Q4, I cannot really see why the margin is coming down that much.

If I look at the average of 2020, it's easier to understand. But when I just look at the run rate that you hit in H2, I do not really understand why it's getting down that much.

So maybe if you could [indiscernible].

But Horst, I think we tried to explain this at the beginning. This is a floor.

It's not a point guidance and a lot of the range guidance, the floor. And it's there to be also defended in the more adverse developments.

So, I think maybe you take that away.

Yes. And to add on that, I think what I tried to make clear is general remarks that the fourth quarter is a special quarter, an exceptional quarter.

But if you ran through a couple of copies, again or in more clear ways hopefully, obviously, with regard to Automotive Technologies. I think the first topic is, the first quarter was volume wise, a very, very strong quarter.

It would not fit to our guidance, which is kind of based on a more conservative market outlook, if you just take the fourth quarter volume comes for. That would be the first topic.

So, consider a lower absolute top-line. Second one is, there have been raw material savings in 2020 compared to 2019 and debt will reverse.

So, that is definitely a headwind and while we obviously, we can compensate or pass-through a bit but not fully and not necessarily in the same year. And the third one was and I mentioned that, on a group level that there has been significant sale from inventory.

And that means that gives you a really strong gross margin, which you have seen in the fourth quarter and that is nothing to repeat. So, that again is a, if you want on the margin that's a headwind.

Then we had during, we had this short-term growth benefit which we also I think, mentioned at some point in time, I've mentioned in earlier quarters, it was still visible in the fourth quarter a smaller number compared to this, but again, this is - this benefit still in the fourth quarter will not be there in the full fiscal year. And then, finally, there have been savings in the R&D side, for example, which are the consequence of some customer projects, which has been delayed and they are ramping up now.

So, I think there are a couple of reasons which contribute to the fact that the margin will definitely will be lower. But again, as Klaus says the 4.5% that is what we believe is a defendable floor.

And, we purposely said it will be larger than 4.5%.

Okay, then forgive me again this question maybe, can you quantify the effect that you mentioned what impact R&D increase and the reversal of these short-term work savings?

Well, I would say that the volume impact, you have to - that's a bit difficult because we have not given economic volume in our top line forecast for Automotive Technologies. Right.

So, you basically if you - but you can do that yourself. Basically, we said for the full year 7% market growth as an assumption, then we have used this outperformance probably we have not been at 5%, but a bit lower then consider this negative FX impact of which might be between might be roughly 2.5%.

And then you are on an absolute kind of volume. And then, that has an impact raw material and the Automotive Technology analyzed, I would say, a mid-double-digit number.

And then the inventory topic is also probably a high double-digit number. And then you go to the functional cost.

And it also includes a bit higher spatial phrase, I mentioned it earlier in the call. And I think that gives you enough flavor.

Okay. Thank you.

Hi, thank you so much for all the transparency and for taking my questions. Just really housekeeping questions actually.

So, I believe that the factoring balance is zero but just for housekeeping, if there's any reverse factoring balances in there that would be useful to know. Also, on the Schaeffler Finance B.V.

entity, obviously, you call the 2025 bonds. Just had a question as to whether there are any further public filings regarding that entity or if you've made a decision about what to do with that entity, keep it outstanding or otherwise?

And then finally, on M&A, you've given a lot of transparency about free cash flow. But just wondering if you had any updated comments on bolt-ons or even some potential smaller medium sized divestments that we could think about in 2021?

Stephanie, let me take the last one, and then Klaus continues with the two other questions. And the last one is pretty easy to answer.

There is nothing new that we can share with you. The M&A strategy is in place.

And I can only confirm, we are looking to smaller acquisitions that fit technologically. That's the answer to your last question.

Okay. Thank you.

So, on the B.V. side, indeed, we have fully redeemed the last bond of Schaeffler Finance B.V.

on November 4. But we have made no decision so far in the future of Schaeffler Finance B.V.

so that's something which is open. On the factoring with regard to the ABCP program, that has a volume of roughly €150 million unchanged and also no change which is included in our guidance.

Okay, thank you.

Well, ladies and gentlemen, thanks for joining this call. We look forward to the next events that are coming up.

There's a roadshow planned virtually in the next couple of days, starting next week. We have our Annual General Meeting in April and then the first release on the first quarter that will certainly be very interesting then in May.

Once again, thank you very much for staying with us today. And we look forward to all your questions, all your interaction, and everything you need to know from us.

Thanks a lot. And bye-bye.