Transcript Pre-Close Call Q2 2026

TRANSCRIPT / PRE-CLOSE CALL Q2 2026

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Company Representative

Heiko Eber, Head of Investor Relations

Conference Call active Participants

Jose Asumendi, J. P. Morgan

Christoph Laskawi, Deutsche Bank

Ross MacDonald, Citi

Vanessa Jeffriess, Jefferies

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Heiko Eber

Ladies and gentlemen, I'm very happy to welcome you to our today's pre-close call on

Q2 2026. And as usual, before we move to the content of today's call, I'm sure that you have all taken notice of our well-known disclaimer. Please note that this release and all the information herein is still unaudited and that our next quiet period will start today after the call.

We are holding this call to remind you of relevant public information previously provided by Schaeffler AG or otherwise available in the market, which may be helpful in assessing the company's financial performance ahead of Q2 2026 results on August

5th, 2026.

Now looking at the agenda, as always, I will guide you through the key messages and give you some more clarity on our divisions. And of course, after a short presentation, you will have the opportunity to ask questions.

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So, if we go to Slide number 3, we start with a brief overview of the key aspects of Q2.

We expect sales in Q2 to be flat year-over-year with only marginal negative FX- adjusted growth. Q2 EBIT before special items should be higher than Q2 2025, approaching the midpoint of our full-year guidance range of 3.5 to 5.5.

And regarding our free cash flow, we anticipate a moderately negative figure in Q2, which is mainly impacted by restructuring and integration cash-outs. However, we are well on track to reach our full-year free cash flow guidance.

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Now, if we move to Slide number 4, our divisional performance.

On Slide 4, you can find the prior year sales and EBIT margin figures by division, including some comments on the respective market sales and EBIT margin developments in Q2 26.

And let's get started with E-Mobility. The market environment in Q2 was challenging, especially in the US, as you all know. Also, the demand in China was rather soft, whereas Europe and Asia-Pacific experienced a robust market environment. Our sales were higher year-on-year, leading to a high single-digit FX-adjusted growth versus prior year. Please note this development was partially supported by a one-off related to the US market. And when talking about profitability, we were able to further improve our EBIT year-over-year, reaching a Q2 margin level within our full-year guidance range of -15% to -13%. As just mentioned, also this partially driven by a one- off.

At Powertrain & Chassis, we are unfortunately still facing a challenging market situation, in particular, in China. But contrary to our E-Mobility business, the US market is showing a positive momentum at PTC, which can serve as a proof point of our successful hedging strategy. This eventually leads to a moderate sales decline in

Q2 year-over-year with mid-single-digit negative FX-adjusted sales growth. And as said, this development is driven by the China market situation and our well-known

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strategic decision to phase out certain businesses. On the profitability side, so we expect another strong quarter. So Q2 with margin levels approaching again the midpoint of our full-year guidance range of 10% to 12% despite a negative one-off effect.

If we are taking a look at Vehicle Lifetime Solutions, we saw a stable demand in Europe and Americas and a positive market environment in China and Asia-Pacific. Q2 sales are expected to show slightly negative FX-adjusted growth. We are currently unable to fully meet customer demand, but we are actively working to close this gap, and let me say, this is maybe not a perfect situation, but it is a good problem to have if the customer call-off is higher than what you can actually deliver. The Q2 EBIT margin is expected to be strong again, above prior year level and within our full-year guidance range of 13.5 to 15.5%.

And last but not least, on Bearings & Industrial Solutions. The market environment overall continues to be flattish, still lacking a material recovery of industrial production around the globe. Developments had been heterogeneous across regions and sectors. So, Q2 sales are expected to be flat year-over-year with marginal FX- adjusted growth supported especially by our aerospace bearings. The margin should be clearly higher than prior year, around the upper end of our full-year guidance range of 7% to 9%. At the end, it's a strong operational steering and a successful execution.

And again, a faster than expected successful execution of our structural measures, which are paying off in this quarter once again, leading to a clear margin improvement despite any material top-line growth.

So, to summarize the key takeaways. For half year one, we see two divisions that are trending at the upper end of our full-year guidance, one division is well on track at the midpoint of the guidance, and one division is step-by-step approaching the lower end of our full-year guidance range as previously communicated. As a result, the group margin is trading comfortably within the EBIT range of 3.5% to 5.5% and this in a still very, very challenging and volatile market environment.

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Slide number 5, well-known, so you see our full-year guidance, which we anticipate meeting across all key metrics as already said. For sure, always with hindsight to the geopolitical tensions, in particular the still very, very unclear situation in the Middle

East.

And last but not least, before we eventually jump into the Q&A session, just one short notice. As usual, after the call, we will distribute our consensus sheet and we are again very grateful for your contribution and your estimates until Thursday end of business.

And now let me hand over back to the Operator for our first question.

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Operator

Ladies and gentlemen, we will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two.

Questioners on the phone are requested to disable the loudspeaker mode and eventually turn off the volume from the webcast while asking a question. Anyone who has a question may press star and one at this time.

And today's first question comes from Jose Asumendi from J. P. Morgan. Please go ahead.

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Q&A SESSION

Jose Asumendi, J. P. Morgan

Thank you very much, Heiko, for the comments, intro comments. Just three quick ones.

When you think about the guidance at the beginning of the year and now, what was driving the initial assumptions during the year, the upper end of the margin range or the ability for the company to hit the upper end, and has anything changed in that framework between the beginning of the year and now?

Question two, regarding humanoids, I understand you've been doing a few meetings with investors in the past weeks. Any highlights you would point out or any update, any data point that came out in the previous discussions with investors in the past weeks with regards to the project of humanoids and how that is evolving?

And then three, as we think about price recoveries from OEMs on inflation, inflation cost, is that still a project, is that, traditionally the fourth quarter should be the strongest quarter in terms of price recoveries, or do you think that, you know, we could see some of that already in Q3 and Q4 this year? Thank you.

Heiko Eber

Thank you, Jose. So, let's start with the assumptions that we have taken at the beginning of the year. I mean, what has changed and that's I think a very obvious change across the industry, the global car production is lower than we originally estimated.

So that's for sure impacting our top line and which is something where we take a lot of pride in that so far, we were able to compensate it to the extent that we don't see any significant impact on our bottom-line results.

So, the ability of our automotive divisions to really show that they are agile enough after many years of unfortunately practicing to deal with this volatile situation and adjusting the costs accordingly is something that at least I'm impressed of.

And also, on our industrial bearings business where the situation is, as said, also rather flattish, also there the execution of the self-help measures that have been initiated where we said previously that we are roughly a year ahead of time and it's just good to see that this is now also translated into results.

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So, again, biggest change for us top line or the number of vehicles being produced and for us the ongoing challenge to offset these effects to avoid an impact on the bottom line.

Now the second question on humanoids. Of course, there is always news. I don't want to take everything away for the Q2 release, so I need to leave something for my CEO.

But what is very, very promising that the speed of how we engage with new potential customers is unbroken.

As an example, last week we attended the biggest physical AI event in Paris and it was really, really good to see that despite the fact that there were a lot of humanoid OEMs and suppliers attending this trade fair, I would say that the by far busiest booth was the Schaeffler booth, which shows that there is a significant interest in our products.

And the second thing I would like to highlight: You remember during the Q1 call, we said that we are expecting the first SOPs for our humanoid business still in Q2 and I'm glad to say that they are in progress, so they have started. This is for sure still on a volume-wise low level, but we started serial production, which is encouraging and now it's a question of ramping up this business.

The last one on price recovery. I mean, you know how this works in our industry. It's number one, it's something that's never going to stop. It's, I would say, the circle of life in our industry. Yes, we still have ongoing recoveries of tariffs. I mean, it's not something that we talk about a lot these days, but they're still there. So, they didn't go away.

So, we are just getting better and better together with our customers to process these tariffs and to make sure that there is a timely recovery. But for sure you can imagine that our customers and also, we have an interest in bundling these activities. No surprise, there are discussions about volume shortfalls, there are warranty topics and normally you at one point in time you put it in a big bag and negotiate it customer by customer. But I would say it is within the normal course of business.

Jose Asumendi, J. P. Morgan

Thank you. Thanks, Heiko.

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Heiko Eber

You’re welcome.

Operator

Then the next question comes from Christoph Laskawi from Deutsche Bank. Please go ahead.

Christoph Laskawi, Deutsche Bank

Good evening. Hey, thank you for taking my question. The first one to the extent that you can comment just on the one-timers that are mentioned in E-Mobility and

Powertrain. It reads like E-Mobility is essentially a compensation for a contract cancellation. And on Powertrain, not sure if you can comment more. If you think about the absolute Euro amount, is that essentially a wash or net zero or is it still a negative or positive if you could comment?

And then the second question just on the phase-out business in Powertrain & Chassis.

In the current market environment, is this accelerating or is it basically just running on plan quarter by quarter as you forecasted it at the start of the year? Thank you.

Heiko Eber

Thanks, Christoph. Yes, so also here I don't want to take everything away from my

CFO, but you're right. On the E-Mobility side, that's pretty much a compensation for program cancellations. That's why we made this little addition that it was linked to the US business, so I guess it's not so hard to guess. So, you're right, this is cancellation recovery, which by the way, also something that we are proud of because it is easier said than done to finally convince the customer to send you a check.

On the Powertrain side, that's a mixed bag of topics that have been boiling for a while, that have been now successfully negotiated leading to a negative impact. And if you basically take both together, this still means that we had a slight negative impact on our result in Q2, but again, largely mitigated. At the end, we stick or we stay with a small negative impact in Q2.

On the phase-out business, very interesting question. What we see is that also there, very mixed. We have some products where we see a slight acceleration because customers are combining platforms and that might lead to an accelerated phase-out.

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Of course, they might favour to choose the product that has a longer lifetime, remaining lifetime. So, we have products where we see an acceleration.

But then again, due to the fact that our transformation globally to E-Mobility is slower than expected, we see that the one or the other customer has extended the lifetime of existing combustion engines and basically is approaching us asking for adding a couple of months extra in supplying these components, which as you can imagine, under certain conditions we are willing to do. But at the end, it will not change the phase-out plan dramatically. We expect that by the end of this year, the phase-out should be no major impact anymore. So, I guess starting next year, we don't need to discuss this topic longer.

Christoph Laskawi, Deutsche Bank

Very helpful. Thank you.

Operator

Then the next question comes from Ross MacDonald from Citi. Please go ahead.

Ross MacDonald, Citi

Yes, thank you, Heiko, I really appreciated the call. A few questions from me. The first one just on E-Mob, looking at the sort of last four quarter trend, looks like gross margins in E-Mob have been rising sort of quarter-on-quarter to the tune of about

200 basis points if I look through the last year.

And then similarly in Q1, you did about a 4% gross margin, which was again about 200 bps higher versus 1Q last year. Given the top line seems to be accelerating in E-Mob, how should I think about gross margin expansion in Q2 of the E-Mob division?

And then maybe a quick follow-up just on the one-offs you mentioned for E-Mob in

Christoph's question. Should we expect any of these, I know they're one-offs, but should we expect any more of these one-timers in the second half? And were you pencilling in some of these one-time benefits in the E-Mob guidance as you gave it at the full-year results or does this push us more to the sort of high end of the E-Mob margin corridor?

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And then just a final question on the VLS lost business in Q2. You said it yourself; it's a nice problem to have, but should we be expecting a recovery of that lost business in Q3 or how should we think about that issue resolving itself? Thank you.

Heiko Eber

Thank you very much, Ross. So, to start with E-Mobility. Of course, an improvement in our bottom line is very much driven by an improvement on the gross margin side.

So, we see as expected a gradual improvement. This is not game-changing, so it's not that you jump up 5, 6 percentage points, that would not be reasonable.

This is very much linked to a proper execution of all the ramp-ups and very important, ramping them up without significant friction during the ramp-ups. And there I can say:

So far really, really great performance of the E-Mob team. So, ramp-ups are running according to plan. We can see it in the top-line, we see it in the gradual improvement on the gross margin. So, I guess on track for what we have planned for 2026.

And the follow-up question on Christoph's one. No, as we speak, I'm not aware of any additional one-offs that are in the pipeline. But what can I say? The nature of one-offs is that they normally come outside of the regular business. So, we have, of course, when we set up the plan, we know that there are certain projects where we are expecting to get a recovery from the customer. So yes, those one-off effects are not on top, but they are planned. The uncertainty normally comes from the timing. So, are you able to close certain negotiations within a reporting timeframe? This time we can say it worked out well. So, it was according to plan. So not an unplanned positive, but also not anything where we had to move out a decision.

And last, but not least on VLS. As said, we have measures in place to increase the output to catch up the backlog. Will we be able to fully recover in Q3? Now that's pretty much also impacted by how are the demands overall developing. What we see at the moment is that with a stable demand, we should be able to work off the big part of these outstanding call-offs, which should also give us a reasonable growth compared to last year in Q3.

Operator

Then the next question comes from Vanessa Jeffriess from Jefferies. Please go ahead.

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Vanessa Jeffriess, Jefferies

Hello. Just in E-Mobility, given the one-off in the US, I mean, 45% of sales are in Europe in the division and I'm just a bit surprised you didn't get some more operating leverage from that just given the cost base there. I know US is tough, but a third of this division is ICE, right? So, I guess just wondering is the China profitability headwind so much more pronounced than thought and will in the second half that pose some risks to the guidance range?

Heiko Eber

Yeah, thanks Vanessa. So, at the end on E-Mobility, the most positive thing I can say and I really mean this very positive, as we speak, the division E-Mobility, at least according to our internal plan, is doing exactly what we have planned for this year.

So, when we break down our plan, our budget for 2026 and we compare it to our year-to-date numbers, this is an almost perfect match.

So, despite some changes here or there, despite some ongoing negotiations where, as I said, you never know whether or not you can close it in time to really meet the reporting deadlines, we are perfectly on track. And for us it was clear from the very beginning that in order to reach our guidance, this is a full-year project.

You could see the same pattern over the last couple of years. We know we have a very strong Q4 again maybe due to the R&D reimbursements that we traditionally get in Q4. So, if I look at half year one, we are where we wanted to be. What I have to say and that is true for the entire group, the visibility for the second half is, as for the entire industry, is limited. Our customers also are not so sure what to expect.

So, the call-offs that we see in the system for Q3 look reasonable. Will they actually be executed? Hard to say. The first couple of weeks in the third quarter look okay.

Visibility into Q4, very honest, too early to say. So, it is – I would say – it's the new normal in our industry that the mid-term visibility is lower.

But as I said before, it only means that we as a company need to maintain this agile approach. For sure there are areas where we can even get better, but so far we were able to react to whatever the market has, whenever the market has changed and we are very confident that we can continue to do so also in the second half.

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Vanessa Jeffriess, Jefferies

Thank you. And then on Bearings, I guess seems to be going very well with the improvement plan and I've heard you say this a few times lately that it's going ahead of plan. So, I guess is it more likely than not that this ends up at the top of the guidance range for the year and is there actually upside risk there?

And then, just another question on that one, I've had a few more questions recently about, you know, potential M&A in Bearings, especially given the weak market and wondering your thoughts on that.

Heiko Eber

Okay. Yeah. So, on Bearings, for now let's say that as we said, half year one will, we will be at the upper end of our guidance range, which is really great. And please I know I had many discussions with many of you last year that we had this very volatile development of profitability especially for Bearings, from one quarter to the next.

So, I see it as a very, very positive news that between Q1 and Q2 we could stabilize the level of profitability. That's what we have promised beginning of the year and I'm glad that we can make this happen now. The outlook for now looks like yes, we should be able to keep a very decent level of performance also for the second half of the year. If nothing unexpected changes, I guess we will trend towards the upper end of the guidance. But as I said, with the current visibility, I would say we feel confident with our guidance range. We are striving for sure to reach the upper end for Bearings

& Industrial Solutions and we will at least from our side work every month very hard to get this done by the end of the year.

And on M&A side. Number one, I hope you're not disappointed that I will not, even if

I could, maybe the pre-close call would not be the right time to discuss M&A strategy.

But as we said and as Klaus said during the Q1 numbers, for us at the moment the focus is on finalizing the integration of Vitesco. We are looking left and right, that's our job. If there would be any unique opportunity, I guess we would take even a closer look.

But for now, also there the focus for Bearings & Industrial Solutions is executing the restructuring, executing the self-help, stabilizing the business at a decent margin level, getting the business back to double digit and from there we will take it on.

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Vanessa Jeffriess, Jefferies

Thank you.

Heiko Eber

You're welcome.

Operator

Ladies and gentlemen, this was the last question. I would now like to turn the conference back over to Heiko Eber for any closing remarks.

Heiko Eber

Yeah, thank you very much. As usual, thank you very much for your time, thank you very much for your interest, thank you very much to my great team for all the good preparation. And if there are any particular questions, feel free, we are here to help you with more mid and long-term information at any time.

On the current trading, as you know, we are entering our quiet period after the call.

So, thank you very much, have a nice rest of the evening and talk to you soon.

Bye-bye.

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Backup

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