Continental Aktiengesellschaft (CON) Earnings Call Transcript & Summary

Hello, everyone, and a warm welcome. Thank you for your time today. We have received quite a few questions. So in this call, we would like to give you a follow-up on Katja Garcia Vila's decision not to seek another term on the Executive Board after her contract expires this year in December. This session will be recorded and will be available on demand on the IR website. We will conduct a Q&A session. [Operator Instructions] Having said that, it is my pleasure to have us started and hand over firstly to our CFO, Katja Garcia Vila.

Yes. Thank you very much, Anna. And yes, let me straight start right away with sharing my motivation why I have decided not to seek for another term in Continental. I've thought that through long and hard, and it was also not an easy decision for me. And for sure, there's never the right time and it's never the right timing. And still, I think what we have achieved with Continental over the past, let's say, 2.5 years since I became the CFO of this company is remarkable. We've laid the foundation, and we've started well into our era of execution. And I have taken care that we will have enough time to hand over Continental into great hands and also assure a seamless transition. And for everyone who knows me, and some of you do know me quite well by now, I promise that we will not lose momentum. We will continue and stay focused in our era of execution to achieve what we have promised to you and also promised to our employees here in Continental, yes. I will continue to fight quarter-by-quarter to give you the proof points that I promised to you and to show you that we progress in the decisions that we have taken, and this is also why you will still continue to see me for a couple of months and interact also with me directly. As you know, my term ends in December, yes? And as well as we've promised you to provide you more transparency on the figures in Continental, and I think I've already started to keep some of these promises, we will also keep you informed about the process and the progress of the process trying to find a successor for me. It's been a privilege for me to work for Continental for 27 years and has also been a privilege for me to work with you. And I hope that we continue to do that. But I also understand that my decision might prompt a lot of questions. And let me assure that this decision is purely driven by my personal desire to seek other opportunities in my professional career. And yes, with this, I will hand over to Niko.

Yes, Katja. And before talking about leaving, first things first. So you're still here. You mentioned it's mid of March, and thanks for giving us the time to properly execute this transition during the course of the year. And just to make sure, once Katja says a couple of months, that means in German several months, just to make this in the right way, not precisely, too. So no misunderstanding. Her mandate job goes until the end of the year. And we plan this transition. Once the new setup is defined, we'll let you obviously know during that course. . Yes, timing is never good, Katja already said in particular, once somebody plans to leave who's well appreciated within and outside of the company. And you know this, we know that. However, let me explain why this timing was exactly the 12th of March. It was exactly the first day within the government of our Supervisory Board where the Supervisory Board could have decided on her extension. So she came first. It was the first time where she could make sure that her intentions are clear, and that's what she did. So that's why it was precisely March 12. And for sure, in the total timing, you might say this is not the best one. No, of course, it's not the best one. And we very much regret, the whole Board, that she is planning to leave. However, as said, we still have the time to plan this in the right way. As said, Katja is the same as me, more than 27 years with the company. So we know each other quite well. Most of the Board members know her very well. And she already mentioned, she's a fighter. She will fight until the last part, and she has great, great interest in Continental. And all what she did was always in favor of the company and not for herself. So we very much respect her decision. However, we know as well at the same time that she will give everything and goes the extra mile until her last day will be done. And she mentioned the last 2.5 years, we commonly managed difficult times in automotive. At the same time, we manage the group. We extended the Board, which is as well why I'm saying, okay, being now in March this year, we have a much better position than March last year. Philipp, the Philipp with 2 Ps for automotive is on board. I'm currently in Frankfurt handling with the team then how the automotive business goes through March. So he is fully dedicated to this, freeing up my time as well to steer the company and obviously as well look after what is happening on the finance on the other side. And on top, we have Olaf on board, Olaf Schick, for our integrity and law. And you know that we have many things there to sort out and to push forward and make use and being sure that we use this as a competitive advantage going forward. So the setup is much better. We are much stronger and relate the foundation in the Capital Markets Day at the end of the year. Capital Markets Day, which we developed as a team in joint responsibility. And this is, by the way, how our governance is set. The whole Board is responsible for the group results for the entire cooperation and the strategy which we have seen and the commitments we have seen are joint responsibility and joint commitments of the Board. For sure, we have sector responsibilities. And we say we are united, we're purposeful and fully dedicated when necessary. Of course, we have to drive our sectors with full targets and put all the efforts within those and giving them all the opportunity to win. On the other hand, we as a group, we have to facilitate, make sure that we are doing the right decisions, right capital allocation and so on to make them successful. When it comes to our strategy and targets, it's important to know as well that those targets and plans, they elaborated bottom up as well as top down. So the teams are coming up. The sectors are coming up with their plan with challenges on the group level commonly. So the rubber guys commonly challenge the automotive and the group guys, the same. And we are coming then commonly to an agreement, which we execute further. So you could see on my chart of the triple play, very much mentioned on the short and on the midterm accountability. We are accountable for what we promised. We are striving behind our commitments. As Katja said, she will be a full integral part of the team going forward. To do this, in the short, she mentioned quarter-by-quarter, and I tell you she fights day by day, quarter-by-quarter as well as bringing -- paving the way towards our midterm targets going forward. As said, driving the allocation process is a big task offer as well as challenging and pushing the sectors to give the best performance. And on top, obviously, she is the interface, as you know, to the capital markets. She will keep those responsibilities and will continue, as we said. However, I'm strongly at her side. We are sitting in Hanover desk-by-desk. That gives you maybe the feeling every morning I talk to her and can ask her where we are, where we are going forward. And everybody who is coming to us knows that I'm close. And I will watch. If anybody thinks that she's not going the extra mile or go the continuous way, I will make sure that we have -- everybody has the full dedication and knows I'm there for long, still much longer. So my contract has been extended then last year. So I will make sure that this transition period runs as smooth as we can and that everybody understands how committed we are to what we conveyed forward. So as said, she will be for the capital markets fully available. And myself, Philipp is onboard and Olaf, as I mentioned, we'll spend as well more time during that time of the transition phase in order to make sure that questions -- your questions are answered strategic and operationally. So I will get in, spend more time and make sure that no answer or hopefully, no answer will be unanswered. So to wrap it up, Katja remains 100% committed. And we will make sure -- well, 110%, I have to say, because she is as the team very competitive and she wants to succeed, and it's physical pain for her once she sees that we cannot live up to our commitments and we won't make it. It might happen, but then we come up with plans how to catch up in going forward. So commitments are there, and we strive for finding solutions and always going forward in order to get there. She is an integral part, and I will make sure that this is whoever question this, I will step in and make sure that this is the case. And the ones who know me, I'm a figure person. I'm close to the financial parts. And with pleasure, I'm stepping in and making sure that everybody understands that as well going forward. And as I said, as soon as the setup is decided how we're moving forward, we will let you know. But until then, be ensured razer-sharp focus on our commitments, on our plans and on our era of execution. With that, I hand over to Anna to see whether there are questions, which we have not answered yet in our speech.

Thank you, Niko, and thank you, Katja. [Operator Instructions] And we have received a question or a question and a command. So that comes from Taylor Mason from Team Capital. It says, "Hey, Katja, thank you for your loyal service. It has been a pleasure. Will you be staying in the automotive industry?"

Maybe first of all, thank you very much for the compliment and for the appreciation. I also enjoyed working with all of you very much during the course of the past years. And I can promise that I will keep you posted on developments as soon as I will be able to talk about them and be ready to communicate them. All the time being, be assured I'm here as the CFO of Continental. That's my priority. That's my task. That's my focus. And I will drive the era of execution together with my dear colleagues and Board member, fellows, as I did in the past.

Thank you, Katja. The next question comes from Michael Foundoukidis from ODDO. Have you decided if the future CFO will come from inside the group or be recruited outside?

I will take that one. You know that it's a task of the Supervisory Board to select the CFO. And obviously, myself, have been in the past and I will be in the future involved in such a discussion. And it's the duty of the Supervisory Board to look inside the company, what are the talents which might fit into the shoes of Katja and to screen as well the market, where are there outside opportunities, which are superior, which are better options that we have internally. So be ensured I'm not the Supervisory Board, but I know we are looking outside and inside, and the Supervisory Board will decide on the best option. And as said, I'm typically involved in such discussions in order to make sure that the new person fits into the team and that we have the full trust as well going forward.

Thank you, Niko. The next 2 questions come from Sanjay Bhagwani from Citi, and I will read them one by one. So first, he says thank you for confirming the 2024 and midterm targets. The first question is maybe touching on the key priorities and functions. Can you please explain how the role or involvement of Head of Auto Business Unit and CEO play in Auto's turnaround? For example, involvement of Philipp and Niko in price negotiations and auto turnaround and other key functions. I think this is for you, Niko.

Yes. Sanjay, you can be ensured one thing is pretty similar between Philipp and myself. Wherever we add value, we are jumping in. And we are not shy in tough customer negotiations. I've been key account manager myself, once I started long time in the tire side and negotiated a lot with customers, and they know how important the backup of the CEO. At that time, it was Manfred Wennemer, who gave me the backup with lots of discussions. And as well later on, Emmanuel was a strong backup from the CEO, be it on the auto side and the group side is guaranteed. So we are commonly, I mean, first Philipp. And then once we see I add value going in, highly involved in our strategies in the discussion as well in the negotiation setup, if the team can find a reasonable resolution, fine, we don't have to get in. But if we get further, obviously, we are jumping in. And I can tell you, we are basically always involved in those customer parts. One more intense. One, a little bit less. But we have to make sure that we find right results, as you know, as this is so important going forward for us on the automotive side.

Thank you, Niko. The second question also from Sanjay is on the successor. Could you please provide some color on when do we hear next and the key criteria the Board has established in terms of choosing a successor?

Yes. The timing, as said, please respect that the Supervisory Board, which has to make that decision. Obviously, just internal, that is relatively fast. But once you look in and out and make sure that you find the best option, that might take some months. You know Katja has a mandate until the end of the year, and she is in this transition phase fully committed. Please understand that we cannot give more timing or more flavor to that. Obviously, we all have an interest to have a decision soon. Whenever the start will be then, we have to accommodate that it fits best to both parts.

Thank you, Niko. We have received another question from Haseem Shah from Mondrian Investment Partners. The first question, Haseem, I think was just answered, what are the characteristics for the new CFO. So allow me to jump directly to the next question.

I think I have not answered this.

Yes. You have not? Okay.

I was referring to the timing. Key characteristics, that is difficult to mention. I mean, look at Katja, we look at a second Katja, so to say. Someone who has experience, not just on the finance side, but it would be -- and we've seen that is great if you have somebody who has as well operational experience in different areas. Strong finance background is obviously needed. And knowing what to do there, strong competitive spirit, passion to win and fit as well in this environment and must be a very solid character. To say that, automotive is not a business, which is the easiest business in the world and not the easiest industry. We have to make sure that this person, which is coming, knows what is the commitment once you're in there, that those are tough and bumpy times. However, we as a Board, we stick together and make sure that we shift the pressure on all shoulders. We are going to win as a team and make this company. So obviously, team spirit is as well a very important part for us because we meet twice a month as a Board. We are the ones meeting in Hanover sitting next to each other. We have to make sure that we act as a team day and night, basically.

Thank you so much. Very good details, Niko. The next question is also from Haseem. He's asking what happens in the instance we cannot get someone in before December 2024?

I mean, for a couple of weeks, I have been CFO as well. In 2021, this is not our plan. I'm pretty sure that this will not happen. But if this will, for whatever reasons, have as well lots of finance background. Just in case I step in, Katja has built up a very strong team. She had 2.5 years to work on that. Please be ensured we will manage this properly. But again, I'm very, very confident that before the end of the year, we have a successor.

Thank you, Niko. For the time being, this was the last question in the tool. Should any further questions arise on this topic or any else, the IR team is always at your service. Please do get in touch. And with that, I would like to end today's call. Thank you so much for your time. Thank you, and goodbye.