Schaeffler AG (SHA0) Earnings Call Transcript

Ladies and gentlemen, welcome to the Schaeffler AG Q2 2026 Earnings Call and Live Webcast. I am Aatildia, the Chorus Call operator. [Operator Instructions] The conference is being recorded. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Heiko Eber, Head of Investor Relations. Please go ahead.

Thank you very much. Ladies and gentlemen, I'm very happy to welcome you to our today's call on Schaeffler's financial results Q2 2026. Press release, the following presentation and our interim statement have been published today at 7:30 a.m. CET on our Investor Relations homepage. And for sure, we will provide the recording and the transcript of this webcast after the call. As usual, I'm sure that you have all taken notice of our well-known disclaimer. And also, as always, Klaus Rosenfeld, our CEO; and Christophe hannequin, our CFO, have joined the conference call to guide you through the key information in our presentation. Afterwards, both gentlemen will be available for our Q&A session. And now without further ado, let me hand over to our CEO, Klaus Rosenfeld.

Thank you very much, Heiko. Ladies and gentlemen, welcome to our Q2 conference call. Let me start with Page #3, the key messages for today. I would like to start with message #1 that you already know from the ad hoc statement we had to give according to the German rules last week. We decided to update our midterm targets driven by the market environment, in particular in the U.S. after a solid review of a first top-down plan. You all know that we do a strategy dialogue in the summer. And as a result, we challenged clearly intensively our outlook for the next years and decided that on a more realistic and credible basis, the old ranges for e-mobility were too aggressive and that triggered this change. We have now internally given the directions for the detailed planning and that under German law constitutes an event where we decided to share that with the public. I hope you appreciate this. It created a little bit of turbulence. I understand this, but we had to follow the rules also in the best interest of our reputation with authorities and also wanted to trigger what was necessary internally to move forward with the planning cycle. So midterm targets adjusted. The key message here is we adjusted the top line but decided based on the preliminary planning work that we would stay on group level with EBIT margin and also with our free cash flow target for 2028. That's, from my point of view, a sign of strength. And it clearly shows that the hedging logic, the famous hedging logic that we explained to you several times is paying off. You can also say diversification is on our side. Second key message, results for Q2 are good results in a very challenging environment. EBIT margin improved, while top line was more or less flat. And you see, in particular, that 2 of our divisions have outperformed well, VLS and BIS at the upper end of the full year guidance. DTC comfortably within and also E-Mobility trending towards guidance range. On E-mobility, all of you know that this is not a flat line across the 4 quarters, but the first 2 quarters are the ones where margin is more negative and that then changes in the second half of the year. So I think the results show that despite no real growth in the top line, the company is improving its earnings quality. On that basis, we are also proud to say that our guidance for 2026 is confirmed. We are on track to deliver on all the metrics that are there despite this challenging heterogeneous and fast-changing environment. And for sure, Christophe will explain in more detail the minus EUR 300 million in free cash flow, why we are confident to bring that into safely into the range that we have guided for. I would also add one more point that was mentioned this morning as well. Apart from the usual press release on numbers, we issued another press release on a structural measures that were extended as it relates to early retirement options. Most of you know that under -- in Germany, we have a specific instrument to manage restructuring and transformation that is offered with the support of the necessary agencies and governments in Germany. There's at the moment, discussion that, that instrument could fall away. And we have decided after considerable requests and interest inside the company from employees whether that instrument would still be available to offer that instrument again. This is already agreed with workers' council and the necessary colleagues there. And that gives us another opportunity to optimize our headcount and FTE across the German base. That is not only specific for 1 or 2 plants, it goes across the whole board. And we think that, that will help us again to continue with our performance optimization. We'll come back to this later. At the same time, I can say that the promised structural measures as of November 2024 are all in execution, and we are ahead of plan. This is also one of the drivers for the performance in BIS. Last but not least, our new growth strategy also starts to pay off. We have promising new growth opportunities. The new number that we are publishing for the first time is the order book for the humanoid business. I think we are the first ones to do that. This is, ladies and gentlemen, a conservative number, conservative in particular, because we have applied significant haircuts on the numbers that are given to us also with the experience that in such an environment, things will need a little bit of time to be really projectable. So haircuts here are above 50% to be on the safe side. It's a well-balanced portfolio. One name is mentioned here, Champagne, the 2 others we cannot mention. These are U.S. names. Also the products behind this is well balanced. And I can say that all of them have SOP in 2026 or at the latest in Q1 2027. So we felt that this gives you another good data point to measure success and how we are progressing, and we have decided to publish changes in these order books on an ongoing basis going forward. That is my fifth key message. Let me now go quickly through the other slides so that you have time enough for questions. This is the old midterm targets that were communicated in 2025, September, as you know, just as a point of reference. And on the next page, you see what we have done. We lowered the top line from 27%, 29% to 24%, 26. That's quite significant. And the major contribution here comes from E-Mobility and Bearings & Industrial. On the margin, we have stayed where we were 6% to 8% on free cash flow as well. And you saw that subsequent to the top line change in E-Mobility, we lowered the EBIT margin range from minus -- from above 0 to minus 4% to 0. That's clearly for you, probably a disappointment, but don't get this wrong. This doesn't mean that we give up on profitability in E-Mobility. I'm firmly convinced that this is possible. But what you see later on is that the work on the cost side is well underway. Top line clearly helps. But at the moment, the most important figure is gross profit, and that points clearly in the right direction. We left the 0 because you can imagine that if you are in my position, while I'm rather with my 60 years now approaching the end of my career, and this promise was an important one, I was not really happy about this, but I can assure you that we will do the utmost possible to bring this across the breakeven line, but we also needed to be realistic, and I hope that you appreciate that realism. You see on the top line also a little softer Bearings and Industrial Solutions, also a result of the environment, not so much of the Schaeffler performance as such. And then you see that we have increased the guidance -- the midterm target, sorry, for Powertrain & Chassis by 0.5 percentage point and also for Vehicle Lifetime Solutions. This is exactly what I said before. Here, you see the power of our diversified model. And due to that change, 6% to 8% should be our midterm target or is our midterm target. The rest is unchanged. And with that, I would go into the results. Q2, as I said, a good result. Why do I say it's a good result, flat growth and still gross profit margin improved by 1 percentage point. Midterm EBIT margin also improved by 1 percentage point to 4.5%. Free cash flow in the quarter, still negative. Christophe will comment on this and EPS positive EUR 0.10. This is clearly not the end of our efforts. We want to do more. We want to continuously improve, but this sits from my point of view, very well in our trajectory towards the year-end and what we promised also for guidance. You can all read the details here, and Christophe will explain them in the second part of the presentation. We go forward. And on the next page, you see the sales growth. I don't go into all details, but the minus 0.3% clearly summarize a heterogeneous development across regions and divisions. You see in region Americas, 2.9% growth. You see that China was rather weak. You see Asia Pacific positive -- and you see E-Mobility plus 9.4% in such an environment, that's not a bad result, while the others, except for Barings and Industrial were slightly below the previous year quarter. So all in all, that is acceptable to us, in particular, in this environment. On the next page, you see the famous one on the powertrain alternatives. And I'm happy to say here in the first half 2026, we outperformed in BEV with 9.4% more growth than the market growth, 20.7% to 11.3%. You also have in the back of the details for the quarters. H was nearly there, slightly less than the market. That's clearly also a function of what's happening in the regions in ICE, more or less on line. So in total, in line with the market, but a positive development in BEV. And this is also exemplified by the order intake where book-to-bill in our -- in the BEV product was 1.6x, while the others were below 1x. This is, again, pointing into the direction of why E-Mobility is important to us and why we are confident that we can also outperform in the future. Let me go to the next page. and do all of them quickly. E-Mobility here, I mentioned the key numbers. And I said the ramp-ups in Europe are successfully happening also in Asia Pacific. There are here and there, and Christophe will answer these questions, the one or other one-off positive effect. The order intake at the moment is a little lower than in previous years due to continued market uncertainty. But I can say with an order book that is still safely above EUR 30 billion, I can say we have enough to do that we are not dependent on any new orders at the moment. And what I really would like to point out here is the improvement in gross profit margin Yes, 6.9% for a second quarter is not enough to make it a true success story, but the direction is clear, and this comes in particular from increased productivity. Let me go to the next one, PTC, minus 5% growth, to some extent, also by phaseouts without the phaseouts, minus 2%. So that means we are holding up quite well against these challenging market conditions. Don't forget the transition from combustion engine to e-mobility and electrified powertrains is still ongoing. The order intake goes along -- has to be understood along the same lines. There is, from my point of view, with 0.8x we are clearly going in the right direction. Gross margin is impacted by the volume decline, also by the one or other one-off effect that come from settlement with customers. So this is still to be seen against a gross profit margin of 22.4%. That's a strong margin, and we are more or less able to keep that together. The highlight upstairs shows that powertrain and chassis is not only about cars, but also about trucks, and we're making good inroads in that sector at the moment when it comes to heavy-duty applications. Let me go to the next page. that's ELS. Very strong results, as you saw from the EBIT margin already -- gross margin further improved against the top line that was not growing. Yes, if we measure ourselves against CAA growth slightly lower. But all in all, this business is definitely on track, and we are very happy about the underlying profitability and the earnings power that this business division has. Next page is then BIS. I also mentioned the key numbers there. Strong improvement in gross profit margin, 3.4% growth rather flat against the blended market. We were not outperforming good order intake. We have also here an interesting mix in the regions, positive development in the Americas, Europe, a little bit softer. We see a continuously strong aerospace business. Wind is still one of our best businesses, had a little bit of challenges in Greater China. But in general, we still keep up with that challenge and continue to do good business in China, but the competition is there and gross profit margin, as I said, improved quite a bit. And here, you see the effects of our footprint activities, in particular, Russia's business has done very well in terms of the consolidation of sites, trying to onborgndles, all of that is happening. And we mentioned here as well, headcount reduction of 1,650 people clearly points to the fact that our restructuring activities are starting to pay off. Next page is then on the CEO priorities that we shared with you in the Capital Markets Day, EBIT breakeven, our self-help measures and the portfolio optimization and also new growth. Let me quickly go through them. On EBIT breakeven, I've already said on the next page, the real issue is the top line. You see it on the left. Where we are on track is our operational excellence part with a more dedicated platform approach, the idea to optimize the design to cost activities, footprint optimization, and that is what you see in the gross profit margin, but also in various product cost initiatives. R&D efficiency is addressed. We have for this program and let me stress this for this program, the completion rate of R&D rightsizing is nearly 100% -- and we see also a very encouraging impact that is still small, but that could be increased from AI implementation in the R&D area that will improve also our time to market. And then overhead cost, yes, we further need to improve on that area, but we can definitely see that we are leveraging merger synergies. The targets for the overhead ratio are coming in. And also here, the measures are completed for this program. And we have initiated on top of this a significant initiative to optimize span of control and reduce layers. All of that is certainly not fully visible in the numbers yet, but it gives me confidence that starting with a strong order book and starting with a -- and continuing on our performance measurement measures, we should be able to achieve our midterm targets, maybe slightly delayed, but with a continuous focus on sustainable positive profit contribution. Let me go to the next page, and that's the structural measures. First half of this page says we are very well on track with the program that we announced in November '24. At the moment, we have can say that we have already overachieved the 4,700. So we have anticipated more interest than that number. The planned reduction in Europe is almost completed. completed means contracts signed. And then the dark green bars mean people have left the company, and we expect to realize that full program with even an increased number by June 2027 ahead of plan that shows that Schaeffler has with all the experience in the last years to manage these programs very effectively. And the second half of the page talks about what we put into the press. I already mentioned this. You all know that or you've heard about that the German government is discussing at the moment that early retirement option that has was seen as a very attractive instrument for managing transformation will fall away. That has triggered a range of questions in Germany, what happens to this program? Is that still something that you would offer to us? You all know that this is a program that is dedicated for people at a certain age, and it's certainly something that only works if the company and the employee gives their consent. We have decided with already approval of the Workers' Council that we would offer this again, same terms as in the existing structural measures announced in November '24. And we think that through that, we can probably reduce our headcount number by 1,300 people in the next years. You clearly want to know how that impacts the P&L and the cash flow statement. The problem here is this very much depends on how people go into this program. There are various ways to structure this. You can do it with an active and passive phase where 1 year in 1 year or 4 year in 4 years. So we offer different options. And as this is very early days, we have decided not to give you a full business case here. But what we can say is that there is an immediate positive midterm or mid-double-digit effect in 2027. There are one-off expenses and also some expenses that we can adjust in our earnings before special items. So the program as such is an intelligent, flexible instrument to drive our transformation forward that we will now use an offer according to this time line. By end of September, we should know how many people would like to participate, and we intend to finalize the implementation. That means signing all the contracts, agreeing on everything by end of November. So when we do the next budget, we should know what that means. It is, as I said, a very helpful instrument that we are now using because we were fast with approval and start the communication to employees today to manage the transition and also the transformation going forward. This is only a German program. It applies to plans and all the admin areas. So it's blue collar and white collar and we have ample experience how to make that successful. Then Page #3 on my key CEO priorities is the new growth. I have 2 pages here, one on humanoids. That's clearly gaining traction. Let me show that with the 3 different areas here, customers. We are actively working with 45 humanoid OEMs globally. And we are increasing our strategic investments into that ecosystem on a selective basis. New -- your robotics was mentioned lately and also humanoid AI. We are very happy with this approach that clearly gives us a competitive edge also to others. You all know this. The product development is also something where we can report positively. The number of sample orders has now increased the 50 mark for this year 2026. And with that number, we are significantly above full year 2025. And the key focus at the moment is on production-ready scalability. Our forming technology, as you know, is one of our key competitive advantages because it reduces production time from minutes to seconds. And we can see at the moment, no one really in play who can offer that ability. Delivery is certainly the most important thing. And here, I can say, as I said before, happy to share with you for the first time an order book of EUR 350 million by end of June comes from 3 major global humanoid OEMs in 3 different regions, 7 different products and the launches with the announced partnerships Humanoid and also Hexagon are not included here. The most prominent one that we are allowed to mention, you know that some customers are not allowing us to mention their names. It's [ Charpne ] for the iron humanoid that is famous, as you all know, where the SOP is planned for Q4 this year. Let me mention again, there was maybe a little bit of surprise because when we were asked what's the order book, we gave you a ballpark number that is not fully comparable here because we decided to put in significant haircuts that are done on a customer-by-customer basis because we want to be on the safe side. And as I said, as an indication here, the haircuts on the customer level are at least 50% in certain customers even more. So we want to be safe, and we will update that number on a quarterly basis. Now next page is quickly on defense. On defense, we cannot give you an order book at the moment. But what I can say, the team that we have is completed in start-ups, it is always markets, technology and team. And here, we are super happy with what's coming together. Celia is a very experienced lady from the defense industry with 25 years. Manfred is a 30-year guy with Schaeffler at the end of his career, one of our most experienced technology persons that joined here, who is already making a big difference and representing also the interface to Schaeffler, and we have hired a top CFO externally with start-up experience who starts January 1. Very happy about this team and looking forward to what they bring to the table. You saw some of the latest smaller things, Del Air, you saw Spire, and I can say there are numerous players and conversations that we're having at the moment, building also an order book here that we will publish when we are ready. Let me go to the next page. And then I hand over to Christophe To sum it all up, you know this page, we have been disciplined in our capital allocation. Investment in Q2 was nearly EUR 200 million, more or less on track with Q2. reinvestment rate below 1. So we are reducing capital employed at the moment. That stands at EUR 12.1 billion. And that is, from my point of view, also necessary to bring the SVA and also our return on capital back on track. You see where it was spent, and that is very logical compared to what I said before. With that, my first part is finished, and I would hand over to Christophe for the numbers. Thank you very much.

Thank you very much, Klaus. Hello, everyone. I will go very quickly through a couple of slides to give you a flavor for Q2. As Klaus mentioned, after a very solid Q1, Q2 is also a solid one, even though we see a few headwinds here and there, and we do have some one-offs here and there, some favorable, some unfavorable. But overall, a very good quarter for us. We mentioned it before, the sales are more or less stable year-over-year currency adjusted. But if you look at the gross profit on the right side of the slide and the bridge on the top, you see a full point of extra gross profit compared to last year same quarter. If I look, first of all, at the negative items on the bridge, so volume would be the most prominent one. The bulk of it driven by PTC, I have to add, as expected and actually better than what we had envisioned in our budget for this year. The other point is that we are not playing at exactly the same parameter since of the -- because of the sales of some of the businesses towards the end of 2025 that were still on the basis of -- sorry, that are still in '25, but are no longer then in '26. and I will get into the division-specific volumes after. Mix slightly negative for us. That's more of a play between different programs and different levels of contribution should not be seen as a trend. Pricing, very favorable for us, a little bit helped by a one-off item linked with the settling of a customer -- long-running customer negotiation, let's describe it this way, but also coming from an improvement in the portfolio itself in e-mobility as well as very strong contribution from VLS and then to a lesser extent, but still strong from the B&IS side. So pricing policy that is playing in our favor. Production cost, almost EUR 40 million improvement year-over-year. If I want to simplify it, I would say that half of it comes from the material side -- so the performance of our purchasing teams is what's paying off here. The rest of it is coming again from the structural improvements that we are bringing to the business quarter after quarter after quarter. So improvements in the cost structure as well as operational efficiency. On our cost of sale, to touch on it briefly, it's 2 things, a little bit of an impact linked with U.S. tariff. The main contributor there is, I think, what I touched on last quarter, which is the change that we have made to our inventory revaluation methods which was creating issues in 2024 and 2025. We have it now under control, and this no longer impacts our numbers or not to a material level as it was quite negative in Q2 last year and skewing the readability of our numbers, it shows up here as a positive contribution year-over-year. And the last point is foreign exchange, which on the top line is quite strong, but it seems to phase out -- does phase out, sorry, at the different level, gross profit, and we'll see that it turns significantly positive on the EBIT side due to the natural hedge that we have within the group. If I go to the next slide, we see that EBIT improves by a full point as well, so from EUR 3.5 million to EUR 4.5 million year-over-year. Most of that being carried through gross profit, as I explained on the previous slide. R&D expenses that you're showing here is a little bit misleading in terms of readability. There was a significant reimbursement from one of our key customers in Germany in 2025 Q2, skewing the basis. Of course, it does not reoccur this year, and it creates this minus EUR 29 million that actually hides the improvement made on R&D expenses and R&D efficiency up to 650 engineers actually being phased out compared to last year and an overall improvement of R&D costs and R&D development expenditures. So again, the minus EUR 29 million, not to be misunderstood. It's actually a positive impact that's hiding behind. minus EUR 12 million on SG&A. Again, if I want to reduce it to one core topic, that would be the -- the ramp-up or the increase in speed of our S/4HANA deployment programs with more and more plants going live in 2026 and the associated expenses coming with it. EUR 25 million on others, mainly driven by an insurance topic and reimbursement that we were able to book in quarter 2 on that category. FX, as I mentioned before, plus EUR 23 million, even though, as usual, a lot of plus and minuses. If we go to the next slide, and we then take a quick look at the different divisions, Klaus already covered quite a bit, so I will be quick. Ramp-up on E-Mobility, yes, a little bit of a one-off in there, but still almost 10 points or 10% increase year-over-year, 2 points on the EBIT side. The negative evolution that you may wonder about on the mechatronics and modules is mainly due in Q2 to the weakness in China on some specific projects that we have over there. It is not something that's widespread in Q2. And again, EBIT structurally improves as we ramp up year-over-year. even though it's again, a little bit amplified by one-off this year, drive, as you can see on the right side, doing most of the heavy lifting during Q2 in terms of scaling up and ramping. If we go to the next slide and cover PTC, so minus 5.1% decrease year-over-year. If I was to break it down for you between what's coming from the market slowing down or the market phasing out, it would be almost 3% out of the 5.1% linked to market. The phase-out businesses also divesting some business accounts for 2.1% out of the 5.1% that you see here. Obviously, the numbers that you then see on the EBIT side have to be acknowledge as strong, robust and resilient given the volume drop to still improve the contribution to the bottom line in that context needs to be acknowledged. The bulk of the decrease hits Powertrain Solutions, that's the minus 10.9% that you see. And that's quite logic when you think about the way the market is evolving. If we go to the next slide, Vehicle Lifetime Solutions. So I mentioned it a little bit before, slightly disappointing Q1 where we took a little bit too long to settle some customer negotiations that is now sold and was sold before the end of Q1. What we are faced facing in Q2 is a little bit of a difficulty with our own internal supply chain. The demand is there. The market is there. The customer demand for our products and offers is strong, but we struggle a little bit to deliver, which you find in the sales there. We are putting everything needed in order to compensate for that and are pretty convinced that it will be fixed over the next few weeks or months and that we will deliver on the full year commitment. That being said, EBIT itself is also very good news with 1 point of additional margin compared to last year or additional EBIT, mainly driven by somewhat of a favorable product mix, but also a very, very strong pricing policy, the benefit of which you see on the EBIT side. On the Bearings and Industrial side, which is the next slide, again, 0.4% increase in turnover in sales, which is not a huge increase in sales, but what they then deliver in terms of EBIT versus last year, comparable last year, 3.5 points, a little bit helped by the accounting policy adjustments or the fix that we brought to that topic since last year, but also significantly supported by their own internal work on operational efficiency and cost structure, as mentioned before. If we move on to the next slide to free cash flow generation, a little bit off compared to same quarter last year. Key drivers being highlighted on the right side. Net working capital, a little bit negative, to be honest, it's a little bit of a frustration of mine. We are actively working on this one, but we did make the decision to take a cautious approach to inventory levels given the Middle East crisis and some other supply chain topics in order to protect our customers. CapEx, as mentioned by Klaus before, a cautious approach, especially when it comes to the e-mobility side to make sure that we actually match and time the ramp-up of our CapEx with the ramp-up of the markets. The other big item there besides the traditional ones would be the others category with a significant impact there of our restructuring cash out, restructuring program cash out as well as integration related cash out. There's also a little bit in there related timing effect on payroll and payroll taxes, which again should not be read as a trend. It's more of a timing topic between Q1 and Q2, also comparable with last year. If we move on to the next one, you see our usual slide on leverage and the maturity profile. As you know, we tapped the bond market in May quite successfully, I must say, for a total of EUR 1 billion at very favorable terms given the context and bonds that have performed quite well since then. You see an uptick in the leverage ratio at 2.4 that is seasonal, if I may say, and will correct itself between now and year-end, where we expect to land at something very comparable to the end of last year. and it's more linked to the seasonality of our cash flow, dividend payment and bond issuance. If we move on to the next slide on the guidance, where I end the mic back to Klaus.

Thank you, Christophe. And again, I mentioned this at the beginning, we will not spend much time here, but we are confident that with the numbers that Christophe just mentioned, we will achieve our 2026 targets. You can see it there. And once again, when you take the first half in E-Mobility, 2.6x 2, we're at the lower end of the range. That shows again why this is necessary to adjust also the midterm targets. The rest is comfortably in the midpoint of the range. And on profitability, we have said what we need to say. So guidance confirmed. Next page then has the outlook with states. And I think that's self-understood. We will have an event tomorrow, a virtual roadshow with Citi and then continuous events during the rest of the quarter. With this, I hand back to Heiko, and thank you for your attention.

Thank you very much, Klaus, and thank you very much, Christoph. As Klaus already said, as a friendly reminder, tomorrow, we will host our virtual roadshow with the friendly help of Citi. So if there is additional interest, please. And in order to not lose any time, I would propose that we directly jump into our Q&A session. And therefore, I would give back to the operator.

[Operator Instructions]The first question comes from the line of Christoph Laskawi from Deutsche Bank.

I'd like to start with E-Mobility, please, more longer-term question. Outside of volume, what really needs to change in the business to make this a sustainable long-term profitable margin division? I mean at EUR 6 billion to EUR 7 billion in '28, it's clearly not small. So does the structure of the business need to change more commonality or less investments? If you could comment on that, what could be key levers to bring this even above the 0? And then the second question will be, how do you make sure that the humanoid business is not the next e-mobility in the sense that, obviously, there's more and more competition arising, there's regulatory changes. There's uncertainty on growth. Obviously, you have less investment requirements, but I'll be keen to hear just how you prepare the humanoid business for potential volatility in calls or volumes and how you make sure that this is not, again, just hovering around the breakeven for longer? And then just a clarification question on the humanoid backlog. Just to be sure, right, the EUR 350 million only includes 3 customers, and there's more on top of that so that you are still in line with the mid-triple-digit number you gave before? Or is there any change to that?

Okay. Let me start with the last question, Christoph. Thank you very much. I confirm the 3 names. We have been -- we have applied more or less the same logic that we apply in order book calculation for automotive also with humanoid -- so it needs a signed order for series production to make it into the order book. The other potential orders that could come are not -- don't qualify at the moment because these numbers are not there. So potential orders are not in there. And that's probably the main reason why the mid number that was mentioned is not reflected here. We have for the reason to be conservative, we have taken haircuts on the numbers to make sure that in this early stage of the development of the market, we are not sitting on volumes that or expectations that do not come through. That's what I said there is a 50%, if not more headcount per customer that is decided in our internal committees where we say that's a probable amount to be on the safe side. That explains the EUR 350 million. Why are we confident that humanoid will be a business that will make money? For sure, no one can at the moment really say how this unfolds. But as long as you count on your key strengths, and this is why I mentioned the forming technology we have as long as you are not reinventing the wheel and utilize existing processes, existing technology, if possible, even existing capacity for something like this, then that is a different situation like in e-mobility. One key driver for humanoid success will also be standardization. I think you know that we have started this actuator platform where we're saying we're going to offer not for 50 different customers, 50 different actuator types, but rather do it from a platform approach that allows for standardized solutions that is from the experience with other situations like this, a key driver for success. And then for sure, it's pricing. And if competition becomes so tough that it doesn't pay off, I think the experience from other businesses is that you better don't buy business, but rather refrain from the beginning. So with that discipline and the things that I mentioned and also the position that we have in a market that will further develop I am confident that this will make money. It's certainly nothing that you will see in the next 2 or 3 years in the P&L. It will rather need ramp-up and critical mass. That's what we are building at the moment. But on a long-term perspective, this should be a key game changer also for Schaeffler in its business mix. E-mobility, do you -- why do we think that this has clearly the potential to make money on a consistent basis and in particular, on a sustainable basis. A, there is a now really conservatively valued order book that is EUR 30 billion plus despite all the cuts that we have made. That still needs to be delivered. I know that this is top line, and you said volume -- forget volume. But I also said in my little slide that the other key levers, in particular, on the cost side, and this is not just admin, it's in particular R&D, all of that, there are multiple levers that we are pulling at the moment. And I do believe with that, together with -- and Christoph mentioned that CapEx being conservatively used here. Also here, standardization plays a key role, customer interfacing plays a key role, speed plays a key role and commerce is on top of all these aspects. And if we get that right and do not just look at single contracts, but the overall portfolio that we have and continue to develop for customers well, I think this can definitely make enough profit margin that it can contribute positively to the success of Schaeffler.

The next question comes from the line of Horst Schneider from Bank of America.

Horst from Bank of America. I'll start with the least important question maybe. For Christophe on taxes, I remember at the beginning of the year, you were saying that tax rate could be around 100%. It's now 60%. That is a number that we also work with in H2. And when is this tax number coming down?

A couple of points behind this one. The first one would be the situation in the German tax pool. If you look at what drives our tax rate today, it's the imbalance between what we pay in the different regions. Today, in the setup that we have, we pay -- we have a loss situation on the European side on the German tax pool, and we pay in other jurisdictions, China, U.S. are the first that come to mind, but they're not the only ones. So we are working at fixing that. Part of it comes from improving the quality of the business that's there. That goes back to our restructuring programs and the improvement of our profitability quarter after quarter. There is a second topic on the way around R&D and cost sharing agreements in between our different regions. All of these things take time. So I would not model an improvement too fast on that topic. It's something that will evolve over the lifetime of, let's say, our midterm targets. So for 2026, I would not see a significant improvement.

But then it comes gradually down, right, towards '28. So for '28, I assume something like 40%, sounds that fair or...

That is not something that I think we are prepared to communicate on at this point because it depends on the speed at which we move on certain programs.

Okay. Fair enough. No problem. The second question that I have is related to the midterm guidance. When I sum up the various segments, I get to a revenue range of EUR 24.5 billion to EUR 27.25 billion, but you guide for EUR 25 billion to EUR 26 billion, and that is even -- or the summation of the segment is even not including the other line, which potentially is still low in '28. But I wonder why the sum of the segments is lower than the top guidance that you provide. So maybe you can provide some color on that.

Horst, I can do this. I can take that upfront. We have included what we have never done before, a little buffer on the other side on the negative that is there simply because of this environment. So far, we have never done this, but that explains the difference.

Okay. Interesting. We need to see how I cope with that from a forecasting perspective. But anyhow, the other question that I have is then related to free cash flow. So as you rightly point out, H1, your free cash flow ex M&A is minus EUR 300 million. You guide for the full year for plus EUR 100 million to plus EUR 300 million. Is it now -- I think your Q4 cash flow is always strong. There's some seasonality as well. But is it now fair to assume rather lower end of the range? And what is driving the free cash flow in H2? Maybe you can provide some color on that as well.

Christophe, do you want to take that or...

Sure. Again, it's -- Schaeffler traditionally has a very seasonal cash flow generation. Quarter 1 and quarter 2 are typically negative and most of the cash flow for the year comes in, in Q3 and Q4, you saw it last year. What distorts this a little bit are some of the cash flow linked to the restructuring, which are not completely linear during the year. We stand by the guidance that we communicated for the year, EUR 100 million to EUR 300 million. And as I mentioned before, the working capital piece plays a significant portion in that seasonality. So you should -- between the contribution from EBITDA and the improvement of the contribution from working capital. Again, we stand by the guidance that we committed to for 2026.

Okay. That's great. And my last one is more strategic one. When I look at the debate that we are currently having and every day, the perception is that companies announced that they move production away from Germany. And plus I think you at Schaeffer, you still have got something like 30% of workforce in Germany. Bosch also said yesterday, they moved more employees to Hungary. Mercedes was saying more or less the same. We know the story from Volkswagen. To what extent does that debate affect you? You announced this morning another restructuring, a small one, as you rightly pointed out. But is that basically the trend that we should assume going forward that there's more restructuring, which also maybe consumes more cash -- and in that context then also, when I look at the overall net debt and the deleverage that you maybe can achieve with your dividend, wouldn't it be the time then also to say that the dividend basically, the payout ratio comes a little bit down in order to allow Schaeffler to delever a little bit more?