HELLA GmbH & Co. KGaA (ETR:HLE) reported first-half fiscal 2026 organic sales growth of 1.6% at constant exchange rates, outperforming a global light-vehicle-production market that declined 1%, according to management. The company maintained its full-year outlook despite expecting market headwinds to intensify in the second half, particularly in China.
Chief Executive Officer Peter Laier said constant-currency sales reached approximately €4.04 billion in the first half. Reported sales were broadly flat year over year at €3.972 billion, as a negative foreign-exchange effect offset underlying growth.
Electronics and Lifecycle Solutions Offset Lighting Decline
The Electronics segment posted organic sales growth of 6.6% to €1.685 billion, supported primarily by radar products and energy-management systems. Operating income in the segment rose to €144 million from €121 million a year earlier, lifting its operating-income margin to 8.0% from 7.0%.
Chief Financial Officer Philip Vienney said lower research-and-development, administrative and distribution expenses supported Electronics profitability. However, he noted that gross profit was affected by product mix, including higher material content in certain new programs.
Lifecycle Solutions recorded organic sales growth of 5.3% to €516 million, driven by specialty original-equipment business for commercial vehicles and off-highway applications, as well as aftermarket and workshop operations. Segment operating income rose to €65 million, with an operating margin of 12.4%, compared with 10.6% in the prior-year period.
Lighting remained the primary area of weakness. Organic sales in the segment declined 3.6% to €1.746 billion, reflecting program phase-outs and lower customer call-offs that were not fully offset by new-program ramp-ups. Lighting operating income fell to €7 million from €63 million a year earlier, and its operating margin declined to 0.4% from 3.4%.
Vienney attributed the Lighting result to lower sales, unfavorable mix, pressure on gross profit and incomplete adaptation of fixed costs to lower production volumes.
Company Accelerates Lighting Transformation Plan
In response, HELLA said it has accelerated and reshaped its Lighting Transformation Program into what management called “Lighting Transformation Program 2.0.” The revised initiative places greater emphasis on near- and medium-term profitability improvement, while continuing efforts to increase sales and improve the segment’s structure.
Laier said the company is targeting a return to its 2025 Lighting operating-margin performance of 3% by 2028. The program includes measures involving operational and commercial performance, material costs, cash controls, research-and-development competitiveness, project management, selling and administrative expenses, footprint optimization and growth initiatives.
Management said it has established targets for workforce and overhead reductions, equipment utilization, non-quality costs, customer claims, engineering-change recoveries and material-cost savings. The company is also pursuing design-to-cost initiatives, platform standardization, tighter working-capital controls and increased use of artificial intelligence in R&D and administrative functions.
HELLA said the first version of the Lighting transformation effort had produced progress in order intake and international diversification. Net lighting order intake in the first half was twice the level of the prior-year period, with more than 75% of new business coming from outside Europe. The company also said it reduced direct and indirect operational headcount by 7% and 6%, respectively, from the first half of fiscal 2025, while cutting Lighting capital expenditures by 20%.
Profitability and Cash Flow
At the group level, operating income was €215 million, representing an operating-income margin of 5.4%, compared with 6.0% a year earlier. Gross profit margin declined to 21.6% from 23.3%, while R&D expenses fell to 8.9% of sales from 9.6% and SG&A expenses declined to 7.4% from 7.6%.
EBIT increased to €169 million, or 4.2% of sales, from €138 million, or 3.5%, in the prior-year period. Vienney said the increase primarily reflected lower restructuring charges booked during the first half compared with a large restructuring program recognized a year earlier. Net income rose to nearly €99 million from €70 million.
Net cash flow declined to €66 million from €114 million in the prior-year period, as restructuring-related cash payments increased. The company said cash flow improved during the second quarter, reaching positive €150 million after negative €49 million in the first quarter.
Capital expenditures fell 19% to €164 million as HELLA continued stringent capital-spending controls.
Outlook Maintained Amid Weaker Market Expectations
HELLA confirmed its fiscal 2026 guidance for sales of approximately €7.4 billion to €7.9 billion, an operating-income margin of about 5.4% to 6.0%, and net cash flow of at least 1.8% of sales.
The outlook assumes global light-vehicle production of 91.1 million vehicles in 2026. Management expects production to decline 3.2% year over year in the second half, following a 1% decline in the first half. The company expects the sharpest full-year regional decline in Asia-Pacific, down 2.9%, driven by weaker Chinese production in the second half.
Laier said customer call-offs were generally stable entering the third quarter, aside from expected pressure in China. He added that the company expects Electronics momentum to continue in the second half, supported by its existing portfolio.
About HELLA GmbH & Co. KGaA (ETR:HLE)
HELLA GmbH & Co KGaA, together with its subsidiaries, develops, manufactures, and sells lighting systems and electronic components for automotive industry worldwide. It operates through three segments: Lighting, Electronics, and Lifecycle Solutions. The Lighting segment offers headlamps, rear combination lamps, and car body lighting including radomes, illuminated logos, and front phygital shields, as well as interior lighting products. The Electronics segment provides automated driving products, such as radar sensors and steering electronics; sensors and actuators; body electronics, including lighting electronics and access systems; and energy management products.
