Vitesco Technologies’ order backlog by end-CY23 pegged at over Rs 2,500 crore, driven by electrification components | Autocar Professional

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Continental Automotive’s powertrain and electrification solutions arm – Vitesco Technologies – has declared its finances for 2023, and the company says it has fully achieved, or even exceeded its own forecasts on key financial metrics.

Vitesco Technologies reported consolidated revenue of Euro 9.23 billion or Rs 811 crore, despite “a persistently challenging market environment,” the company claimed, as it registered a 4.4 percent year-on-year growth in sales.

Its adjusted EBIT margin at Euro 341 million (approx. Rs 30 crore) stood at 3.7 percent, which it says was much higher compared to its forecast in the range of 2.9 to 3.4 percent. Owing to improved profitability, despite the higher investments, and financial burden from the contract manufacturing business with Continental, the company reported a free cash flow of Euro 84.9 million (Rs 7.4 crore) in FY23.

While it generated sales amounting to Euro 1.3 billion (approx. Rs 114 crore) in 2023, and registering an over 18 percent year-on-year growth, the company says the less significant increase in sales was owing to the softening of demand for electrification components in the market in the Q4 of 2023. It added that the numerous project ramp-ups could not compensate for this effect.

In FY23, Vitesco Technologies’ total order intake stood at over Euro 12 billion (Rs 1,054 crore), nearly Euro 8.3 billion (Rs 729 crore) was attributed to electrification components. As of December 31, 2023, the company says it had a total order backlog of around Euro 58 billion (approx. Rs 5,097 crore), of which, more than half was related to electrification components for the first time.

“The large number of product launches in 2023 and this year confirm our attractive electrification portfolio. With our strong partnerships, for example in the form of long-term supply contracts for silicon carbide, we consider ourselves well prepared in this regard,” said Andreas Wolf, CEO, Vitesco Technologies.

The company intends to disburse its first planned dividend payment in 2024 after its executive board and supervisory committee proposes a dividend distribution of Euro 0.25 per share, at its AGM slated for April 24, 2024.

According to Sabine Nitzsche, CFO, Vitesco Technologies, “We fully achieved – and in some cases exceeded – our published guidance for all the main financial KPIs. It remains our clear aim to continue to boost profitability in the years ahead. And we will continue to invest heavily in the growth market to strengthen our leading market position.”

Powertrain and electrification division results

By concentrating on two divisions instead of four since the start of 2023, the company is sharpening its strategic focus on electrification of the drive system to operate more effectively, efficiently, and flexibly in the market for sustainable drive technologies.

Sales generated by the Powertrain Solutions division decreased to Euro 6.12 billion in 2023 (2022: Euro 6.37 billion). Adjusted for changes in the scope of consolidation and exchange-rate effects, the decrease amounted to 1.4 percent. The decline in sales was chiefly attributable to the planned reduction in contract manufacturing for Continental and the disposal of business units.

Adjusted EBIT of the Powertrain Solutions division improved year on year and was up by Euro 119.3 million or 34.5 percent to Euro 464.6 million in fiscal year 2023 (2022: Euro 345.3 million). This equates to 7.6 percent of adjusted sales (2022: 5.5 percent). The positive operating activities – especially in the division’s core business – are the reason for this development.

In fiscal year 2023, sales in the Electrification Solutions division climbed by 14.3 percent to Euro 3.16 billion (2022: Euro 2.77 billion), driven by the strong performance in China and Europe.

Adjusted EBIT of the Electrification Solutions division declined year on year and was down by Euro 5.0 million or 5.4 percent to –Euro 98.1 million in fiscal year 2023 (2022: -Euro 93.1 million). This equates to -3.1 percent of adjusted sales (2022: -3.4 percent). The increase in ramp-up costs for new projects was a key factor here.

“We are confident that we will reach the break-even point in the electrification business in 2024. That is an ambitious goal, but achievable,” said Nitzsche.

Outlook for 2024

In view of the challenging market environment and the planned significant decline in contract manufacturing activities with Continental, Vitesco Technologies is forecasting sales of between Euro 8.3 billion and Euro 8.8 billion. Due to the increase in profitability that is anticipated in the electrification business, the company expects to generate an adjusted EBIT margin of between 4.5 percent and 5.0 percent. The company is also forecasting a negative free cash flow of around Euro 350 million in 2024, owing mainly to negative effects from reduced contract manufacturing activities and the repayment of start-up financing to Continental.

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