HELLA KGaA Hueck & Co. Business Report FY ended May 2016

Financial Overview

(in million EUR)
FY ended May 31, 2016 FY ended May 31, 2015 Rate of
change (%)
Factors
Overall
Sales 6,352 5,835 8.9 1)
EBITDA 816 766 6.5 -
Sales by Segment
Lighting 2,720 2,427 12.1 -
Electronics 2,084 1,937 7.6 -


Factors
1) Sales
-During the fiscal year ended May 31, 2016, the Company’s sales increased by 8.9% to EUR 6,352 million. Excluding positive exchange rate effects of 1.4 percentage points, the Company’s organic growth over the previous year was 7.5%. The increase in sales was driven by strong demand in China and Europe for the Company’s automotive division, particularly with components that address automotive trends such as energy efficiency, such as lightweight heat sinks in headlamps. These gains were partially offset by a slight contraction in sales in North and South America, due to lower exports by German OEMs to those regions.

-Sales for the Company’s Automotive segment grew 10.1% in the fiscal year ended May 31, 2016 to EUR 4,804 million. The broad global footprint of the segment provided positive effects, in that weakness in the Russian and Brazilian markets did not affect the Company’s performance significantly. Growth was driven primarily by the launch of new products such as complex LED technology, electronic systems and components for energy management, driver assistance systems, and electronic steering.

Contracts

-The Company will be equipping the new Audi A4 (available from November 2015) with LED rear combination lamps, a lighting control unit for headlamp actuation, additional small lamps, the interior roof module and interior rear lamp. The rear combination lamps are also featured on the Audi A8 and A7 models. (From a press release on January 13, 2016)

-The Company announced that its lamps are used in the light carpet function of the new BMW 7 Series. Unlike previous systems that were installed in the exterior mirror or the underside of the driver door, the LED modules are mounted in the rocker panels behind the front wheels in a static position. There, the lights illuminate the ground in a radiant and uniform fashion for a total length of over four meters. The Company also supplies interior light solutions for rear-seat passengers on the BMW 7 Series. Specifically, the Company supplies the light guides used for ambient lighting and the interior reading light mounted above the rear row of seats. (From a press release on January 6, 2016)

-The Company announced that it is equipping the BMW 3 Series with LED headlamps, LED rear combination lamps, interior lighting and a variety of electronic components including radar sensors, rain/light sensors, and intelligent battery sensors. (From a press release on December 18, 2015)

-The Company announced that its ambient interior lighting is featured on the new Chevrolet Camaro. The color changes slowly throughout the vehicle in a subtle, flowing pattern from the center screen. The driver can either directly select 24 different colors, link the color of the interior lighting to the driving mode or activate a demonstration mode. The U.S. site in Plymouth, Michigan and the interior lighting competence center in Wembach, Germany were responsible for project management and development. Development of the electronics was supported by the site in Pune, India while mechanical development involved Hella Automotive Mexico. The light guides and control unit are also being produced in Mexico. The interior lighting site in Bratislava, Slovakia is handling LED module production and calibration. (From a press release on September 15, 2015)

R&D Expenditure

(in million EUR)
FY ended May 31, 2016 FY ended May 31, 2015 FY ended May 31, 2014
Overall 623 544 514
-Automotive 591 512 478
Overall R&D expenditure as a % of overall sales 9.8% 9.3% 9.6%
R&D employees 6,361 6,063 5,880

R&D Facilities

-The Company is planning to open a new development center for automotive lighting technology in Stuttgart, Germany. The new location will focus specifically on developing LED products and components for customers in southern Germany. During the initial expansion phase, the new development center – opening in the fall of 2016 – will employ about 25 people. The new center will eventually employ more than 100 people. (From a press release on April 28, 2016)

Technological Alliance

-During the fiscal year ended May 31, 2016, the Company continued its joint operation of the L-LAB with various universities. The L-Lab is a research institute for lighting technology and mechatronics that the Company has been jointly operating with the University of Paderborn since 2000.

-The Company is working with the Fraunhofer application center to develop laser-based emissions for headlamps. In addition, the Company has been conducting research on photonics with partners and the Fraunhofer Institute for Production Technology IPT. Two other collaborative projects that the Company is involved with include the flexible production of high-performance optics, and another project for the development of fully adaptive LCD-based vehicle lighting.

-Research projects which the Company completed in the fiscal year ended May 31, 2016 include the “u-AFS” cooperation project, in which the Company worked with Osram, Daimler, Infineon, and the Fraunhofer institutes to develop pixelated LED systems. Other projects the Company concluded include the development of an auto-adjusting headlamp system with the Fraunhofer Institute for Production Technology, and the integration of OLEDs with a comprehensive research conglomerate.

R&D Activities

-In the fiscal year ended May 31, 2016, the Company's Lighting business division continued its research and development strategy on broadening the availability of LED technology for higher-volume vehicle segments, and developing of HD (high definition) headlamps for premium vehicle segments.

-The Company’s research and development activities in lighting are focused on the following areas: pixelated LED light sources, LCD technologies, digital mirror devices, laser light source applications, holography, and OLED technology.

Patents

-The Company registered 172 patents during the fiscal year ended May 31, 2016.

Capital Expenditure

(in million EUR)
FY ended May 31, 2016 FY ended May 31, 2015 FY ended May 31, 2014
Total 463 347 368


-The Company’s capital expenditure for the fiscal year ended May 31, 2016 was primarily dedicated towards the maintenance and expansion of buildings, plants, machinery, and other equipment.

Investments outside Germany

-In March 2016, the Company’s new manufacturing facility in Indaiatuba, Brazil began series production of body control units and fuel pump control modules. The plant began production activities with an initial staff of 30 employees and supplies vehicle manufacturers throughout South America.