Hella’s lights dimmed by supplier failure

Lighting specialist HELLA managed to boost group sales in 2015/2016 despite failure of a supplier in China.

Group sales rose by 8.9 per cent to €6.4 billion in the financial year 2015/2016 ending on 31 May 2016 (previous year’s sales were €5.8 billion).

At the same time, adjusted operating earnings (EBIT) also increased by 7.1 per cent year on year from EUR €445 to EUR €476 million.

The adjusted EBIT margin was 7.5 per cent (previous year: 7.6 per cent). Special items that had a negative impact on earnings included the effects of the extraordinary supplier failure in China in September 2015. These pushed EBIT down by approximately 2.3 per cent year-on-year from EUR 430 million to EUR 420 million. At the reporting date on 31 May 2016, HELLA had 34,000 permanent employees, almost 5.7 per cent more than in the previous year.

“We have again grown strongly in 2015/2016 in what has been a challenging market environment,” says CEO Dr Rolf Breidenbach, chief executyive officer of the Hella Group, a globally leading supplier of lighting technology and electronic products for the automotive industry.

“We are especially proud Hella could improve sales across all three segments – automotive, aftermarket and special applications. This confirms our belief that our focused product portfolio and our broad global footprint have put us on the road to success. We intend to continue down this route going forward.”

Automotive segment sales grew 10.1 per cent to €4.8 billion (previous year: €4.4 billion). Due to an exceptional, non-recurring charge of €47 million from the failure of a Chinese supplier in September 2015, the earnings of the segment declined by €11 million to €343 million.

Growth was driven predominantly by new product launches – including complex LED technologies, electronic systems and components for energy management, driver assistance and electronic steering. Hella’s broad regional presence was also beneficial.

The aftermarket segment sales increased by 5.9 per cent to EUR €1.2 billion (previous year EUR 1.1 billion). Operating earnings grew by EUR €7 million to EUR €80 million.

Growth was driven mainly by the wholesale business in Denmark and Poland, the garage equipment business and the tangible recovery of the independent spare parts market in Europe.

The special applications segment succeeded in stabilising its business in spite of the still weak demand in the agriculture sector. Sales grew 2 per cent to €315 million (previous year €308 million). EBIT declined from €19 million to €5 million which resulted from the operating development in the Industries and Airport Lighting sub-segments and the sale of these activities. Hella sold these activities in May of the past fiscal year to “optimise” its portfolio.

Hella boosted R&D spend by €80 million year on year to €623 million or 9.8 per cent of Group sales, up from 9.3 per cent in the previous year.

The number of employees working globally in research and development increased to 6,400. Now, almost every fifth employee works in R&D.

Today, Hella focuses R&D work in its lighting business on so-called high-definition headlights that improve visibility. Here, there can be several hundred thousand lighting spots each of which can be activated individually. The result is a significantly higher resolution.

In electronics, Hella supports its clients in the development and implementation of advanced functions that correspond to global market trends including autonomous driving, connectivity and energy efficiency.

Looking to the future, Hella expects a positive business performance this year. It intends to further advance its global expansion, mainly in China and North America (NAFTA) where the company has identified promising opportunities. The aim is to further strengthen Hella‘s position as a core vendor and solutions supplier to the automotive industry.