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00:38 Thank you very much, Stuart. Dear investors, dear analysts, thank you for joining the Schaeffler Group 2021 earnings call.

As usual, our call will be conducted under the disclaimer. Without further ado, I will pass the floor on to Mr.

Klaus Rosenfeld, CEO of the Schaeffler Group; and Mr. Claus Bauer, CFO.

Klaus, the floor is yours.

00:59 Many thanks, Renata. Ladies and gentlemen, at the beginning of our Analyst Conference today, please allow me to make the following statement on the situation in Ukraine.

The situation in Ukraine is terrible. We are shocked by the destruction, the suffering, and the humanitarian catastrophe we are all witnessing.

01:24 In particular today, our thoughts are with all the people who are affected by this war and I should say, in particular with all the women, the mothers, and the children that are fleeing their country. Also in the name of all our employees, our 83,000 employees across the world, we can only hope that this war is stopped immediately.

01:53 For us, at Schaeffler, the safety and the well-being of all our employees has always had highest priority and to date I can say that our six employees in the Ukraine and our 174 in Russia are all well and safe. 02:11 And let me continue by saying, even though it is very demanding in these difficult times to focus on a normal agenda, we would like to present to you now Claus Bauer and myself some insights on the business development, the results for 2021, and also talk about our outlook for the year 2022.

02:36 No one can predict today, how the situation in the Ukraine will further develop and I believe no one today can reliably assess the consequences of this war on the world economy, the growth perspectives for Europe, our supply chains or raw material prices. That is why the Executive Board of Schaeffler AG has decided this morning to suspend the guidance for 2022 as outlined in the ad hoc message this morning.

03:09 I believe and we believe together Claus and I myself that this is the only responsible way for a company like ours to deal with the current situation. 03:21 So much upfront ladies and gentlemen let me now start our presentation in the usual format.

I will do a quick overview, and then talk a little bit about the business highlights in 2021 before I hand over to Claus for the financial results of the full-year and also the fourth quarter. 03:41 If you follow me on Page 4, that’s the usual summary page and while it may not be appropriate in this environment to talk too much about successes, I think I can say the full-year 2021 for Schaeffler was a successful year with strong performance.

10% growth, above 9% EBIT margin and a free cash flow above 500 million, I think that is clearly remarkable and in an environment that was also in 2021 quite challenging. 04:21 This has all led to the decision and the proposal that we made to the Annual General Meeting that we proposed a dividend of $0.50 would means a payout ratio of 44% in-line with our payout range 30% to 50% of net income.

What I also would like to say, we have been successful in driving our transformation, the roadmap 2025 is intact and we have successfully closed our second phase of the restricting program with the financial benefits to be expected in 2023 and 2024 that gives us some sort of a buffer for the two years to come. 05:10 I am also happy to say that, in particular in automotive technologies, we have made good progress on the E-Mobility side.

We already reported about this in the last quarterly call. We have worked continuously to sharpen our operating model and optimize the portfolio management and you will see later on that we are now in a position to give you also for the year 2021 indicative sales split for this new four box model.

05:42 We will also see that the powertrain scenario before the war and before the crisis has been revisited and that we have decided to further accelerate our assumptions with an earlier and faster adoption of best vehicles. I made my comments on the guidance, and that leads me to conclude our first page.

06:10 Before I go further, let me add that in this environment, diversification is key. Schaeffler is as all of you know, not only an automotive supplier, we are an automotive and industrial supplier.

We have an aftermarket division. All of that has helped us to master challenging situations in the past, and I think it's a good base also going forward to be more diversified than simply being a European automotive supplier.

06:45 Page Number 5 has the guidance of the last year. I think I can skip that.

The page Number 6 has highlights and lowlights. Also here, some already mentioned, good outperformance in automotive technologies, 400 basis points for the full-year 2021, you all know that you can't judge outperformance by quarter, but if you look at the trend and the information’s in the backup, you see that we are continuously making up our promise of delivering as continuous outperformance, E-Mobility order intake strong for the year significantly and clearly ahead of our target.

07:27 Aftermarket, strong sales performance, and you will see later increasing demand also supported by new digital offerings in industrial. We're really proud to say that the recovery, the optimization of our profitability reached new heights in the year 2021.

You all know about the Melior Motion acquisition. And I already mentioned resilience and diversification, why this is so important.

07:56 On the lowlight, clearly, the issues of the past have not been sorted out completely. This sector, in particular automotive is still suffering from hiccups in the supply chain semiconductors.

One example, and we clearly saw in second half that was less positive in growth than the first one. Market headwinds, COVID is not completely over, although it looks like that this situation is reducing and key concern that is now clearly amplified to what we are seeing in Ukraine is the increasing cost for raw material energy and also transportation that has already increased throughout the year 2021.

08:42 And with what we have today, I think it's fair to assume that this will continue. Once again, the macroeconomic, but also the environment in the different sectors is very difficult to predict.

So, we cannot really tell you at the moment what we are expecting for the rest of the year. 09:01 Page Number 8.

I think I can take the liberty here to do this very quickly. You can read all the numbers, sales growth for the year 7.4%, EBIT margin after the difficult year 2020 back to 6.9, I think that is a good achievement.

Keep in mind that certainly the first quarter was important for this 6.9%. 09:28 Page Number 9 gives you a little bit more insight on the business highlights.

Order intake for the full-year, for the full scope of the automotive technology division in-line with the previous year of 10.2 billion, 5.4 in the first half, [4.8] [ph] in the second half, the real interesting number is 3.2 billion order intake in E-Mobility and the right side of the chart it displays a little bit our latest product developments, whether this is the already mentioned 800V power electronics or the terminal management opportunities, the market position for 3-in-1 systems, also our further optimized technology for E-Motors all of this sits right where customers need our support. And we feel very good about the advances and the developments in the E-Mobility division.

10:33 Page Number 10 aftermarket – after the year 2020 growth of 13% what is clearly strong also supported by the Asian region and Americas, positive price development already in 2021 to offset some of the increasing input cost. However, margin down to nearly 14%, 13.8% and despite the improvement measures, focusing on material flow and production and warehousing, we have to say that the sales development in Europe in particular was impaired by some ongoing logistical performance issues.

11:18 Here, the [indiscernible] one of the big investments of the past is still creating some concern and we're are dealing with it as we speak in optimizing also here our partner set-up. The input cost in particular product and freight will persist also in 2022 and that clearly makes aftermarket an area to watch out for.

In terms of product development and offerings, I don't want to spend too much time, but the whole idea of further digitalizing the division, creating more digital, positive cost experience is vital to the success of the future. 12:05 Let me come to Page Number 12, our industrial division.

Good and positive development in the year 2021. You see it from growth 13.6%, broad economic recovery continued also in Q4.

Most sectors growing double-digit. Some of the sectors that we're lagging like Railway are returning to positive growth and that also led then to strong finish with an overall margin of 12% for the full-year.

If you remember our mid-term targets then this is clearly an achievement that comes earlier than what we expected. 12:51 The Melior Motion acquisition is small acquisition.

We closed it in February, you all know this. And it's a proof point again that we are serious in not only growing our business internally, but also adding where possible, technological competence here in particular in the robotic business, an area where we think we can do much more and can also generate more profits.

13:17 There are some headwinds. Wind was strong.

There's a little bit of a smoother development in China demand normalized aerospace and two-wheelers all before the war. We now need to see how this unfolds, and clearly also this division is impacted by higher raw material energy and transportation cost, while our measures to pass this onto to customers are more effective than in other divisions.

13:48 Last point here on Page 13, the order book, you see once again a development for the 3-months order book in the year 2021. Order book increasing sales coming down a little bit in the fourth quarter.

So, that means continuous growth in the future. Whatever this crisis now will mean for this chart, we'll see when we present the first quarter results, business highlights already mentioned.

14:16 The fact that we have here, a core business with standardized and specialized bearing offerings across variety of market classes is clearly a big asset and we’re strengthening it as we speak with some bolt-on acquisitions. 14:31 Page Number 14 is the usual slide on capital allocation.

Let me say here, I mean you can read all these numbers. We are clearly at the moment doing what we can to analyze and monitor the situation to also revisit our plans.

I can say that our strategy going forward remains for the time being in place. 14:56 We're not going to change direction, but clearly, we need to see in the next weeks and months to come how we prioritize on the CapEx side, what our CapEx plans for the next 5 years, how they will be adjusted in general, the direction to drive this by reinvestment rate and clearly invest more into the industrial division and E-Mobility remains in place while we'll be maybe even more cautious than we have been before on the mature businesses.

Let's wait and see what this means. 15:29 The chart also tells you that this is a global company where more and more of the investment also happens outside Europe.

15:38 Now, let me come to three topics that I would like to mention before I hand over to Claus for the details on the numbers. The first one is, on portfolio management automotive technologies, you will see here this new chart, you all know the idea of this metrics with mature versus new and powertrain specific versus powertrain agnostic, what we have added on this page is the most prominent product areas that belong into these four boxes from Cam phasers, mature powertrain specific to Steer-by-wire in new business and chassis systems.

16:17 You'll see how this is allocated, and you also see as a second part of the new chart, how then these four businesses relate back to sales and sales growth. You see the biggest part is still engine and transmission.

That is also heavily dependent on ICE. Bearings is something that is rather powertrain agnostic.

16:37 That's second biggest part, makes nearly 30% and has grown by 6%, and then clearly E-Mobility, 1 billion for 2021 with the order intake and with the steep growth that will continue to become bigger and bigger and chassis systems where we have taken out in particular, compared to the past, the whole bearings business, the Chassis Bearings business is now nearly 300 million or 3% of the pie that has also grown quite a bit. 17:15 So, I hope that gives you a much better understanding of how we are set up.

And it also helps us to drive then capital allocation and also future profitability and future activities. That new setup that we will from now on report on a quarterly basis, with these numbers, goes hand-in-hand with a revision of our powertrain scenarios for the next year's on this page Number 16.

You have the old powertrain scenario, the one that was in-place until year-end. 17:57 And you all remember the famous 30, 40, 30.

30% ICE, 30% BEV, including fuel cell, and then 40% HEV. What we're seeing from customers, what we’re seeing globally is that electrification will further accelerate.

The question what this crisis, what the war in Ukraine will mean for this is still open. 18:21 So, we decided to accelerate also our scenario and here you see that for 2025 and also for 2030, we have increased the share of pure BEV from 12 to 20 in 2025, and from 30 to 40 in 2030.

That is more or less in-line with what market expects. It is, from my point of view, a prudent way to look at this and you see that 2035 the scenario has more or less remained unchanged.

So, it's a question of, how the new technology will unfold and we think it will accelerate, and it will further be driven by the raised EV targets of our main customers. 19:12 Now, second point that I would like to share is, our, the new setup for industrial.

You have this on Page Number 17. You look at us as an automotive supplier.

You're all rightfully so very interested in the transformation there. In industrial, it's not so much a transformation.

From my point of view, we need to – we thought about ways how to present our industrial business in a more comprehensive manner. 19:42 And you all know in the past we shared with you eight sectors, plus distribution, and we never got the credits for what we're doing because this was, to detail, maybe to granular and that's why we decided in our disclosure to change course and give you in future these four market clusters.

First market cluster is, renewables, wind and also hydrogen, in particular in the electrolysis side will go into this market class transportation, mobility covers everything from aerospace, rail, off-road and two-wheels. 20:20 This is also the market class that then synchronized as well with the passenger cars and the light-vehicle trucks and trucks on the auto side.

Then you have industrial automation clearly in terms of growth dynamic, the most interesting sector, and then machinery and materials. Also here, we will give you the numbers in terms of sales and also sales growth going forward on a quarterly basis.

And you have here the setup for 2021. 20:57 Let me add the distribution business that is something different than simply a aftermarket or replacement part business that made 28% of industrial sales in 2021 is allocated into the four market clusters so that you have a more consistent picture and you see it's for 2021 consistently, so that all the areas have grown quite significantly.

21:29 Third point, I would like to make, and there's a lot more to say, you saw the sustainability report we published. You all know that we take this very serious and we are strongly committed to turn Schaeffler into a climate neutral company.

We have our targets out. We have working in our climate action plan.

We all know ESG is not only E, there is also S and G that is very important. 21:56 The targets are included into our compensation that was also the case in the years before.

Going-forward it has even been further intensified. My long-term bonus is in future dependent on achieving our climate action plan with all the different milestones that you know.

22:16 So, this topic is critical, and it includes employee safety and it clearly also includes the procurement of our main materials. So, let's stop here and leave you with a message, whatever happens next, despite this terrible war, we will continue to pursue our sustainability strategy.

I personally think that this is very important, not only for our future energy transition plans, but also for living up to our commitment as a socially responsible institution. 22:57 With that, I hand over to you Claus for the financial results.

23:01 Yes. Thank you very much, Klaus.

If you go to the next slide, you see as Klaus already alluded to the sales in Q4 developed solidly. Remember, Q4 2020 was the peak of the V-shaped recovery after the pandemic shutdowns in Q2.

So, therefore, the 5.6% from adjusted sales decrease is to see in relation to that peak, and we can say, especially after the weak quarter, maybe third quarter in 2021 that Q4 2021 was clearly an encouraging sales quarter. 23:47 You look on the left side in the first line below the charts, you see the 9.7% from your trusted sales increase for the total year that Klaus already mentioned.

24:02 Automotive technology was still weaker in Q4 then prior year, but as we already have seen also in Klaus’ part was partly offset with strong development in particular in our industrial division. You look here down at the bottom, you see the split by regions and clearly see the indications that the automotive chip crisis and supply chain issues, and limitation of growth in that sector was impacting Europe and Americas the most as you would have expected.

24:48 If we go to the next side, you see the gross profit development. And I think based on our Q3 call and then our follow-up call in January with most of you, it shouldn't be a surprise that you see the cost inflation for input cost facing in.

You see that in the waterfall chart on the left side in the middle of production cost was a negative impact of minus 141 million, significant portion of that obviously is that cost inflation that was facing in. 25:25 We said in our Q3 call that we expect around 200 basis points of impact due to the inflation and that was what really happened.

But what do you also see and then ongoing to the left side of the waterfall chart, you see that recovery impacts pricing actions on the customer side, also slowly facing in. 25:54 And as we also indicated in earlier calls, that is mainly due to active pricing actions, mainly in automotive aftermarket and industrial distribution, but also some impact continuing as already seen in Q3 of material price classes that we have in place with automotive customers in North America.

26:22 If you go to the next side, over, then you see most important message on that slide is that overhead costs are increasing, but that is also now due to the fact that prior years is impacted by the management of the corona crisis. You know that we used extensive short-term work capabilities in Europe and had other cost effective cost management in place in all other regions as well.

27:06 So, it's not so much about the Q4 to prior year comparison, then really an increase of cost and really a normalization of overhead cost to a pre-pandemic level. If you look at the very bottom of the left chart and you see the overhead ratio in Q4 was 16.6%, which is actually not a bad level.

You also see that one of the main drivers is R&D expenses, which is also due to the fact that we were and have been successful in acquiring E-Mobility project that now the R&D is kicking in for these projects. 27:58 You also see somewhat an increase in selling expenses that is partly to a normalization of overhead expenses.

We are kicking-off marketing initiatives that we have stopped last year because of the pandemic, but you also see to some extent pricing impacts, mainly in the area of logistics reflected in the number here. 28:27 EBIT, no surprise is following pretty closely the gross profit trend 7.8% for the last quarter in 2021 is clearly a strong sign.

It's still lower than the 11.6% of prior year, 11.6 I would say is an anomaly, based on for Q4 unprecedented volume in Q4 of last year. I said, while that was, we were in the middle of the V-shaped recovery in that regard.

So, a 7.8%, especially under the circumstances with the material price inflation is a result that we are satisfied with. You also see for the total year, and Klaus already mentioned that we ended up with an EBIT of 9.1%.

29:31 Maybe a little bit more flavor in detail on the bottom right side. You see here, clearly the impact in automotive technologies, first of all, the extraordinary volume of the prior year quarter impact, but also the in-facing material price impacts with a margin development that is significant.

You see Q4 ended up at 5.5% EBIT margin for automotive technologies and you also might remember that number was 4.6% in Q3. 30:13 So, clearly a recovery from our Q3 performance, mainly due to volume impact and scaling effects that offset some, if not most of the phasing in and material price impact.

So, clearly, if we wouldn't now face completely different and most likely more severe issues with the war in Ukraine, you would have seen something reflected in that performance that is in line with our prognosis that we suspended for obvious reasons. 30:57 Let's go to the next slide to dive a little bit deeper now into the divisions.

First, automotive technologies. So, I start on the right side this time to see how in the waterfall chart you see how the margin developed from prior year.

And as I already said, some of that is due to the fact that we had an extraordinary volume situation especially for Q4 with – that is normally December shutdowns of our automotive customers, yet didn't happen last year. 31:39 So, you see here a gross profit deterioration of 3.9 percentage points, about half of that I would attribute to the material price effect and the other half is really a lower fixed cost steps option, due to the volume impact that I described.

Still, it's a lower volume of lower fixed cost absorption then prior year quarter, but as I also said, already, it's a much better volume situation as we have seen in Q3 of 2021. 32:20 You see then also the effect of the increased R&D expenses that I already described and therefore, I think the 5.5% is our EBIT in Q4 2021 is explainable.

Automotive aftermarket, I start also with the waterfall chart, you see also a significant margin decrease that has similar reasons than in automotive is still a little gap up between our cost impact and price recovery that we obviously tried to close as we go deep into year 2022, and the other significant impact reflected here in the gross profit column is a volume and mix impact of around 200 basis points. 33:22 If you look on the left side, you see that our sales growth, mainly happened in the OES sector and not in the independent aftermarket and that normally comes with lower margins and that would be reflected in that gross profit deviation.

33:49 And last, but not least, industrial, industrial as you see that, first of all, all regions have grown most of them significantly. China, a little bit lower in the growth rate.

You already heard in the summary slides that – and you also see it on the left bottom, that wind is one of the drivers for that wind in Greater China. 34:21 As you all know, and we already reported in Q3 is, the wind demand in China is normalizing after subsidies for offshore [wind mills] [ph] is facing out.

However, clearly a growth driver for the way forward. You also see the aerospace as the only other sector that is significantly decreasing and not growing.

And that is still due to the impact in that sector due to the lower travel volumes due to COVID. 35:08 And you see all other factors significantly growing and contributing to a strong sales growth of that division that also then translate on the right side in a very significant profit profitability improvement.

35:32 You see here in gross profit, the positive impact that some of that is pricing recovery action and distribution, but most of that is the increased – significantly increased volumes and fixed cost absorption in our production plants. 35:55 Coming to net income.

First message here, you see there's not a very significant impact on a group level between the reported EBIT and the EBIT before special items. And then you see in the waterfall chart, the further development financial result not spending too much details here, but that's much improved over prior year, mainly due to the high yield bond that we paid back and had to settle derivatives based on that last year.

36:37 So that – we now see a more normalized level for financial expenses going forward. Income tax is completely in the range of what we expected, based on our regional split and nothing to report there.

And in others, the biggest single-item is Schaeffler Paravan Technologies. That is a shareholding of ours that is consolidated at equity and I'm only mentioning it so explicitly here, because I will come back to that point, but hold your thoughts on that one, because we have decided going forward to change our accounting in regard toward equity shareholdings.

37:35 On the bottom right side, you see the detail of the special items. Obviously, there's set it on a group level for the quarter, not significant, but there is some, actually not for the quarter for the full-year sorry, but you see on the right side, then that there some impacts that minuses and pluses on a division level.

And I would leave it at that. 38:14 Maybe just the biggest impact against the full-year 2020, I think I mentioned that already in the Q3 call.

We built our restructuring approval in 2020 and that was here for adjusted EBIT neutralized, therefore all the pluses and the other big topic in 2020 was an impairment that we booked in automotive in the automotive technologies division. 38:46 Net income on the next slide follows completely what I have presented so far.

You see on the bottom on the left side that we have achieved $0.22 per share in result for the quarter, and for the total year, [€1.14] [ph]. The net income for the total year of 756 million or 748 million after special effects is obviously enabling us to pay or to propose the payment of an attractive dividend of $0.50 per common and onboarding share.

39:41 You know, that we determine the proposal for the dividend based on a public framework. We want to pay out a dividend in the range of 30% to 50% of our group result and the $0.50 would represent 44% of the group result.

Therefore be solidly in the framework range. 40:13 The [ROCE] [ph] is 16% higher than pre-pandemic levels.

That is obviously a very good result. It's also clear that that is somewhat and you might also remember still the ROCE for the last 12 months in Q3.

I said at that time because of mathematical reason the nominator and denominator very favorably in the last 12 months for the Q3 results. And I said, I expect it to be a relative peak and you see some of that normalization in our ROCE here.

41:02 I think it was 16.7% as I reported it in Q3 last time. So, normalizing back here to 16%, but I don't want to take away anything of the accomplishment, pretty solid ROCE.

And if you remember our mid-term ambitions that is clearly above what our mid-term ambitions have been with 12% to 15%. I would have expected without the war further normalization within that range.

But now obviously, we have to monitor the situation closely what this war will bring in economic consequences for all of us, including Schaeffler. 41:57 Free cash flow on the next slide is for the quarter characterized by seasonal related personnel cash outflows, most prominently the Christmas bonus in the Europe, mainly in the European and Latin American localities.

We have reported already in Q3 and continued tactical increase of inventory offsetting partly the positive normal seasonal impact on accounts receivables that normally reduce and they also reduced, but we increased inventories. 42:44 And then also, which is clear in the KPIs on the left bottom side, clearly had higher investment activity in the second half of the year, including Q4.

The investment rate as you see on the left side is now for the quarter at 1.0, clearly higher than in the other quarters of the year. 43:14 On the right side bottom table, as always, you see our free cash flow before M&A and special items and one of the special items that I know you are always interested in, and which also are the biggest numbers there is restructuring.

You see in Q4 we had payouts of 32 million for restructuring. For the full-year, it was 308 million, which then would bring the free cash flow for the quarter to 82 million and for the full-year to 830 million.

So, the underlying cash generation capability of Schaeffler is intact and I think they're quite impressive. 44:06 That leads obviously, then as a consequence as you see here to a very comfortable situation in regard to leverage ratio, leverage ratio is below one.

And there's no maturities in our financing until March 2024. After we paid back Schuldschein in November of last year, and then also a bond this year on March 1.

Actually a very strong liquidity situation. And you see it written down here in the box on the bottom right with 25% of the last 12 months sales number.

45:05 I think we are in a comfortable situation, a strong balance sheet, strong cash generation that I think we accomplished in a somewhat challenging environment and should make us very optimistic, not very optimistic, but hopeful that we can weather also some storm going forward. 45:34 Now, I'm closing with the last slide.

It's a little bit technical. And, but I think it's needed.

We adjust our reporting going forward a little bit. So, that is now the reconciliation for this reporting going forward of the last year.

There’s two significant changes. One I already hinted on with the debt equity, but let's start first with number one here on that slide.

46:10 Of the sales growth numbers for all divisions and the group are slightly changed as you see in our adjusted numbers. That is due to the fact that we now changed our calculation of their foreign exchange adjustments for technical reasons for system reasons, we had to go through a budget rate in the past and re-calculate everything in a budget rate, and then compare the numbers of prior year and current based on this calculation.

46:51 Now, our system allows us to do it, what I think correctly. We use now the actual rates of the prior year to recalculate the actual year and then calculate based on that actual rate calculation of the sales growth.

47:16 And secondly, we decided to account for, at equity shareholdings, differently than in the past. You saw in one of the waterfall charts, that we reported debt so far below EBIT and going forward, we will report debt as part of the EBIT.

47:40 The reason is, indeed our shareholding in Schaeffler Paravan Technologies as you might know, this is an operation that's heavily R&D driven and is completely related to our Chassis business and with our reconfiguration and reclassification of our automotive business and making the Chassis business really some important cluster that we want to report in future that we also want to drive significant growth and we thought that we now also report, especially Schaeffler Paravan Technologies, which is a R&D powerhouse, if you will for our Chassis sector within EBIT. 48:43 That really means and you see that in our Auto Technologies Division, a deduction of the EBIT margin of around 0.5 percentage points, and I think the best way to look at that is that we increase R&D efforts for, especially for Chassis by this 0.5 percentage points.

So, please keep that in mind. And with that, unfortunately, a little bit technical at the end, I will hand over back to Klaus.

49:23 Thank you, Claus. And I will finish now the presentation with the outlook on [Page 33] [ph].

There’s nothing that I have not said before. We suspended guidance.

I can only stress again that's the only responsible way to deal this. And you know from the rules when suspension is possible, that we have to come back with a new revision of our decision at latest by Q1 2021 results that we publish on the 10th of May.

49:59 My conclusion of the outlook is on Page 34. We can cut that short.

I think you heard all the news. We are facing another war driven crisis.

We need to understand that we will navigate in the next weeks and months. So, we are very dynamic, very unpredictable environment.

50:26 Our main task is to ensure operating performance and cash generation in this environment. The Schaeffler team is a strong team.

In this situation, I think you all should take note that also our main customers be it on the automotive and on the industrial side, appreciate strong suppliers. People that have the act together and know how to react in this, who have also a view on different sectors.

So, we know what we have to do. 50:58 We would have loved that the year continues in a different manner, but we will do what we can to keep Schaeffler on track and also make sure that we get back on track with our own plans and with generating value.

51:15 Last page is then on the capital market activities. There are two small Roadshows tomorrow, and on Thursday.

We will then progress with our Annual General Meeting. You have the financial calendar on the right hand side, and I'm sure that you can have that in your calendars already.

51:31 With that, I would close from my side and get back to Renata for Q&A’s. Thank you very much.

51:38 Thank you very much, Mr. Rosenfeld, Mr.

Bauer, and dear operator, we can open now the Q&A session.

52:23 Good afternoon. Thank you.

Akshat from JPM. Thank you for the presentation and all the new details in there.

I have three questions please. The first one on Automotive Technology margin.

I know it is a difficult environment, very volatile, and we have possibility of binary outcome in many scenarios. And it probably makes sense not to have a guidance, but can I ask if we can test the resiliency of the business division [first thing] [ph], or if you could do a stress test?

What kind of minimum volumes do need on a global LVP basis to hit your 4% to 6% mid-term margin target for automotive technology please? That's the first one.

53:06 The second one is on the CapEx guidance of up to 900 million, looking at the current situation, do you have flexibility in CapEx spend in the near term i.e. are you well invested in your industrial and automotive businesses for the next few years or do you have some catch up on investments from the last two years probably.

The last one is on the reinvestment rate in automotive technology. We know you have a more than 1% reinvestment ratio in E-Mobility and less than one in mature businesses, but for the division as a whole, how should we think about reinvestment rates over the next two to three years, please?

Thank you.

53:50 Well, Akshat, I mean, these are all very relevant questions. And again, I have to say, as a reminder up front, we have not finished our stress testing work.

We are in a situation that is unprecedented when it comes to information and expectations. For sure, we are doing several scenarios, but when you ask me what's the minimum volume where we would still make 4% to 6%?

That is a question that I cannot answer with a simple number and say x million is it and below x million it is not like this. It depends very much on how this volume unfolds.

54:36 I do believe that the composition of that volume plays an important role. I can give you as one indication.

The fact that we have strong regions and dedicated regional board members in the region is now our big asset. Our Chinese colleagues start to alert us that they say there are more and more big Chinese customers, you know, I'm not going to mention names, that had come to them and say, we need more investment in the region.

We want more volume for our local production. And that could be something that helps.

We also see something like this in the Americas. 55:17 My general view is that we will probably see more deglobalization whether we like it or not.

And that could also to some extent compensate for the setbacks. We will have to digest from this overall situation.

So, let's leave it here. 55:37 We are doing our work at the moment.

Your question is spot on. But again, I cannot give you a simple volume number that's as from this onwards it's 4, and from this onwards it’s 5.

There's a drop-through rate that needs to be calculated through the different divisions and we are on it at the moment. 55:59 CapEx, I would say Claus, there’s virtually no catch up from the past.

You can be rest assured we have towards the end of the year, on the one hand, made sure that with all the strong cash flow that we made throughout the year 2021 that we're not sitting on CapEx that then moves into the next year. I think that's the one explanation.

56:26 On the other hand, the 900 million is an up to number. It's a rich number for an environment where we thought it would go in the right direction.

So, there is some significant buffer in that number. And we have already started to ask people for reprioritization.

Don't forget CapEx needs lead time. Most of the bigger projects cannot be invested within 6 months to 12 months.

56:54 There are some big projects running, but as it looks like the ramp up curve is something that gives us significant flexibility on the 900. On the reinvestment rate, also here if I would now give you a number and say this is what I'm expecting for the two or three years, I would contradict my statement that at the moment, it is not really predictable.

What I can say is that this new format, the new operating model gives us a much better handle to see that the business where we want to grow in the future. 56:53 And I dare to say that I think that E-Mobility will rather continue and maybe even further accelerate due to the situation given oil price and energy transition than in the past, than in the past.

I think this model gives us a much better way to do this systematically, and maybe that leads to given the size of the business to even the higher reinvestment rates in E-Mobility and even lower in engine and transmissions. 58:00 So much for the color, but please understand, I cannot lead through scenarios in this call.

58:07 I can understand that. Thank you.

58:09 You're welcome.

58:17 Hi. It’s Christoph Laskawi, Deutsche.

Thank you for taking my questions as well. The first one will be on the supply chain currently for auto and industrial.

Could you comment if you, right now are still able to source everything you need and is that more or less running smoothly and the impact will be more on say secondary effect, which causes production stops at the OEMs? 58:44 The second question then on your open exposure currently to prices like raw materials, which are increasing, could you just give us a reminder on how long you are currently locked in on steel, energy, and other costs?

And last question will be, in the discussions that you currently have with the OEMs, which I believe must be extremely intense, are they giving you any indication on changes in underlying demand that they see or is it just that they are focused on working through the order backlog, which should be 3 months to 6 months at least for most of the European ones? Thank you.

59:24 Okay. It's a range of questions, and Claus you will help me, if I forget one.

You said this last Chris, we are in intensive conversations with all big customers. They call us we call them and I think the whole industry at least year here in Germany, if not in Europe has learned from COVID, how to work together when something happens that creates a risk for the supply chain.

If there’s one positive from COVID than this is one of the things to mention. 59:58 I can say for sure, we are seeing, and you know this from the newspapers, some of our big customers are stopping production in certain areas.

We at the moment at Schaeffler, plans are running. We have seen in the first 8, 9 weeks, continuous call-offs in some areas even above budget.

That is now starting to reduce. How this will unfold is something that we need to see.

60:35 I don't see a radical stop somewhere where someone says, we're not going to do anything anymore. That's not the case.

Most of the companies that we are talking to have some sort of plans in place, how to re-root activities, how to find other sources and let the things go forward. You mean, you have this famous issue with [indiscernible], help me with the translation of this.

[indiscernible] harnesses of one of our neighbors here in the region. 61:12 If you dig into more detail there, you see that this doesn't stop the whole global automotive production.

It may have an impact that is in the 80 million range that we have for this year, some sort of a digestible impact, but we don't know what's coming and that's I think where the question mark is, no one can tell you at the moment how long this will last. 61:35 So, the best you can do is to say agile to stay tuned to understand what's going on and to react, there's a backlog to be dealt with.

The end customer demand is also open. On the one end, we see inflation.

Cars get more expensive. You see this in used cars.

On the other hand, customers may shy away from doing something it remains to be seen. In any case, there's a backlog from the last years, where I think cars are ordered, and that could smoothen it a little bit.

62:07 In terms of material, gas supply, and all these kinds of things, I can say, we started our task force already before the invasion on the [24th] [ph]. So, for the Russian exposure, but also for the steel, we buy from Russia, we have already found ways to re-root this through other suppliers, mainly Chinese suppliers.

We have already taken all necessary action again before the 24th to secure transportation, mostly through ship instead of road and rail. 62:45 Some extent higher rates for sure.

In terms of energy and gas, gas supply for Schaeffler is until the rest of this year. Claus secured in terms of volume and price by 90%.

So, also here, we acted quite quickly, already in the middle of February to somehow close that. 63:11 Let's say, if tomorrow, this crisis further escalates, what that means, I can't tell you, but what I said before, will do the best possible to secure that the company can run and what gives me some hope in confidence is that this management team is a proven team that has its act together when it comes into these situations.

That may be different if you have completely new people, but Claus, for example is a longstanding colleague that I trust 100% and we assume it works very well to get this done even over weekends.

63:49 Very clear. Thank you.

64:02 Thank you for taking my three quick questions. First, I would like to ask about the mid-term view of the restructuring, perhaps as a part of the investments required to move forward.

In 2022, I think you mentioned [extraordinary expenses] [ph] and with the digitalization focus for the mid-term is this a right time that remain significant for the free cashflow? And the second question on the cash received and the leverage ratio, you provide the range that includes a higher leverage as well, which half of this ratio, you think is more at risk to drive such a potential increase?

Do you see opportunities products perhaps in the market, which are low for the equity market that’s also an opportunity? 64:46 And finally on the currency, if you can give us our guidance for – maybe the beginning part from the year, do you see that impact on your accounts?

Thank you.

64:57 Edoardo, thank you very much for your questions. It were a little bit difficult to understand.

If we have not understood them correctly, please jump in and ask them again. Let me start with the last one and Claus you can take over.

I think your last question was on currency exposure, if I understood this correctly, and how you see that unfolding? 65:17 You saw on one of the pages in the backup that we have only given directional guidance.

It's obvious that the U.S. dollar stronger, the Euro gets weaker, and also the Chinese renminbi gets stronger, that in itself tentatively is positive for us.

We were positioned for rather 120 than for parity. There's a Mexican peso that plays an important role and other currencies may go into different direction, but if this environment continues, at least, I can thank Claus and hand over to you to explain a little more detail, before I take the next question.

I think that shouldn't create at the moment extra stress, rather little bit of relief, what happens on the FX side. Maybe Claus you want to answer that?

66:12 I absolutely agree with that. And I mean, the obvious question also could be what it's about the [ruble] [ph]?

We obviously have some ruble cash flows. We are ruble long in a normal environment and our ruble exposure is hedged by 85% over the next 12 months.

And so, obviously, also with the exchange rates before the invasion. 66:43 So, in regard to the dollar and all other currencies, we normally base our planning on what the forward contracts would be if we were to completely hedge our cash flows when we start budgeting, let's say in the middle of the year.

And then hedge it on a rolling 12-months basis. So, we always have somewhat of an average hedging rate over the 12-months period.

67:17 There's a little bit of layering in there with different volumes of the layer sizes, but we clearly are also hedged for the U.S. dollar, we are not hedged at 108 or whatever it is today, but we are also not hedged at 123 or 125, so it's somewhere in the middle, but I also would completely agree with Klaus that there's no stress no our significant stress on that front.

67:53 Okay. Let me go to the first question that was, if I understood it correctly, Edoardo the mid-term view, what are we going to do?

What I can say today and don't forget this is all days old, we have decided also on our board meeting this morning that we will continue with our strategy. 68:12 There's no need to turn in circles now or change direction, we'll stay the course.

What is necessary is and that's what's happening at the moment, all major strategic initiatives, all major strategic projects, all major CapEx projects, all major overhead spend will be revisited will be reprioritized. What I can say and I said it also in the press, this could lead to the fact that initiatives like on the digitalization side will even be speeded up and executed, implemented more forcefully.

68:53 I think the digitalization is an area where efficiency gains are possible, also short-term and maybe that's exactly the right thing now to do. In any case, I can say, sustainability and when I talk about sustainability, this is very much the climate side of it, the whole energy transition.

The whole question of what can we offer in alternative energy sources, hydrogen, all that, will clearly, from my point of view, get more emphasis in the future. 69:25 So, we’ll stay the course in digitalization, we’ll stay the course on sustainability and see what that means.

In these days is not the time to talk about opportunities, but I think when the world changes, there are always also situations where you can do and can achieve things that were not possible in the past. 69:45 Leverage, as far as I understood it correctly, you were asking about how this ratio is going to develop?

I think you know this is a company that it has always proven its free cash flow conversion power and also 2021 is a good proof for it. We'll continue with our restructuring.

70:05 Maybe also here, we can speed up certain implementation areas and we are in the third phase where all for allocations, the contracts have been signed. And we've already looked at some transfers here in Germany, whether we can possibly accelerate this and speed up, but in terms of the leverage ratio, the key aspect here is EBITDA that drives the ratio, and we will benefit as it's the last 12 months rolling figure, a little bit from the good quarters of the last year, but we'll also see what kind of counter measures we need and we'll put them in place with adequate priority and bigger.

70:53 Perfect. Thank you very much.

Maybe just a follow-up on the leverage ratio, do you see a potential increase in [indiscernible] for investment given the price of assets maybe is – are lower now for everybody? So is that an of opportunity for you?

Thank you.

71:06 Can you say again, you see an increase of what?

71:09 Investment decisions.

71:13 Acquisitions. So, maybe on the acquisition strategy, I mean you, sorry, I didn't hear that well.

We have been, if I may say so, looking backwards, quite lucky that we have not engaged in any significant high volume acquisition that we would now need to refinance or deal with. I think we are also lucky that we have always said, we're not going to do anything with carve-outs or splits of putting the whole company at risk because of some undue operations or larger transformational moves that at the moment is good for us.

71:50 And our M&A strategy with a more risk averse approach on smaller bolt-on acquisitions is something that I would not stop. I would continue to watch and look for clever technological additions if they are available, but you can be rest assured we will be very conscious of our firepower, we'll be very conscious of the risk profile that we have.

We're not going to put the company now at risk in this such an environment, it’s – the nature of the game is risk off, risk down, and making sure that all of this settles somehow and then we can then see that we get back on track with our overall strategy.

72:34 Thank you very much.

72:51 Hi. Thank you very much for taking my question as well.

My colleagues have already asked the questions on the macros. So, I'll have a you on E-Mobility and one on commodity prices.

So, my first one is on E-Mobility. If you could please provide some split or guidance on the order book like what proportion is from the hybrid versus BEVs?

And my second question is on thermal management. I understand that you have reinstated the terminal management now into E-Mobility and there's somewhere around a 400 million effect from that in the E-Mobility sales.

So, just wanted to have some more color on like are these the components actually going into the BEVs or there’s some portion which is for the eyes as well? And my final one is on the commodity prices.

So, if my memory serves well, I think earlier this year you were mentioning that you may actually move to like more towards like the spot purchasing of the commodities versus hedging and contacts as you are expecting these steel prices to normalize, so if you could provide us some update on that as well, that’ll be very helpful?

74:12 Okay. Let me start with the last one and Claus, you support me if you want to add something.

The main commodity that we need to do our business is steel. I think you all know this we have outlined and Claus has been very outspoken in the last call, also at the beginning of the year to explain that situation.

At the moment, just assume we would have no war in the Ukraine. 74:37 I think we are in a good track with a dedicated end-to-end steering by watching what's happening in the market for material prices and how to pass this on to customers.

That project is up and running. We’re monitoring this on a weekly basis.

And we see that our assumptions for the material price are more or less, again pre-war in the Ukraine confirmed. We also see that there's good progress week-by-week and passing on certain price increases to customers, certainly easier in industrial and automotive aftermarket that are in auto, but also in auto, it is going according to plan.

75:21 We never said that it's possible to hedge everything 100%. We also never said that it's possible to pass on every price increase to a customer, but as it looks, we are on track.

Now, on top of this, we have the new development, we need to see what that means in terms of extra stress. That is, as I said before, very difficult to say.

75:47 I just – while we are all focused on, rightfully so on the terrible development in Ukraine, talking to our Chinese colleagues, we've already seen some signs that Chinese steel prices come down, little bit come down, that could be a good positive thing for us as well. Don't forget there's the war in Ukraine, but there will still be global division of labor, and there will still be global trade, and we should not get completely off track that a significant part of our businesses in China and the U.S.

and that also in these regions we are – we have our sourcing partners. 76:27 E-Mobility, sorry, I can't say more than tentatively the share of best business also best project is increasing as we speak, maybe again, this is only January and February, we had good success in January with major projects coming in.

We’ll report about this then in the next quarters to come, but there – the two big projects that were coming were both [indiscernible] only projects, so the trend is clearly intact. And you will understand that I'm not giving more than that directional statement.

77:11 In terms of Thermal management, you are right. This is a technology and an area of competence that we already developed for ICEs.

What the colleagues have done now, they have asked themselves, is it possible to integrate Thermal management module into a 3-in-1 e-axle, that's the latest innovation. We also presented in end of the year at the [fares] [ph].

And that would mean that you basically have to split this business. 77:42 I don't know where the 400 million are coming from, that's something that I cannot confirm at this call without going back to Matthias and his team, but in future, we'll see this Thermal management, the more E-Mobility accelerated as a really interesting feature to generate a Schaeffler competitive advantage through the integration of 3-in-1 e-axle because it helps us to make the e-axle even more efficient for customers by a clever way to manage heat or manage cooling.

78:16 And that's I think where it really makes a difference. There is some business from the past, but as we are more and more investing into [indiscernible], that business will also start to run off then together with ICE business.

78:32 Thank you. That's very helpful.

Regarding the 400 million, basically, I just took out the restated numbers. So, in 2020 you had reported E-Mobility of 651 and then this year, the reinstated number is 1,047, so that gives [Multiple Speakers].

78:49 This is something that – I understand what you did. Thanks for the hint.

That's what I assumed, but there are more movements in-between than this single one. It's not only Thermal management that moved from left to right, there are other changes in the setup.

79:06 Yeah. Thank you.

79:07 You're welcome.

79:18 Hi. Thank you very much for taking my questions, and appreciate all the color during this difficult time.

The one question I had was just on behavior because I guess as analysts, we'll probably sharpen our pencils and go back to the 2020 production shutdown during times of stress, just sort of stress test all our companies, but I guess, from your standpoint, what are some of the key differences now between that time? And for example, you did draw down to small amount under your revolver and ended up recovering very quickly, would you after paying down debt over 2021 consider going back to the debt market either through the revolver router or adding additional cash over this timeframe given the uncertainty?

80:12 Well, I think Klaus said it. We have a very, sort of comfortable liquidity position with 25% of our sales being available in liquidity be it cash on the balance sheet or undrawn facilities.

I don't see any need to change anything there. In the past, we always thought, maybe we need to put money differently at work, but I have no concerns at the moment on the financing side.

So, we will stay the course with that. 80:47 If I remember the days in 2009, when I joined here as the CFO, we were always looking at 10% of sales as a decent number, and now we have 25.

Even if this situation may not be comparable to the crisis of [indiscernible] crisis and whatever we had there, I don't think there's any need to do anything at that front. The balance sheet is robust.

The company knows what to do and we'll monitor it, but I don't see any negotiations or discussions with banks necessary to optimize what we have.

81:21 Great. Thank you.

81:24 Good. Then, ladies and gentlemen, let me close the call.

It was a pleasure that you joined us. Very unfortunate and tragic times you all share that.

We appreciate that you're interested in our situation and we are there for all your calls and questions. Go talk to Renata and the team, and Claus and myself will make ourselves available.

For us, the most important thing is that this war stops and that we somehow get back to normal times. 81:57 With that.

Thank you very much for listening. And all the best to you personally and your families.

Bye-bye.