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Operator: Dear ladies and gentlemen, a warm welcome to the Continental AG Analyst and Investor Call Full Year Results 2025. [Operator Instructions] Let me now turn the floor over to your host, Max Westmeyer, Head of Investor Relations.
Max Westmeyer: Thank you very much, and welcome, everyone, to our Q4 and full year 2025 results presentation. Today's call is hosted by our CEO, Christian Kötz, and our CFO, Roland Welzbacher. A quick reminder that both the press release and the presentation of today's call are available for download on our Investor Relations website. The annual report will be published later this month on March 19. Before we start, I'd like to remind everyone that this conference call is for investors and analysts only. If you do not belong to either of these groups, please kindly disconnect now. Following the presentation, we will conduct a Q&A session for sell-side analysts. [Operator Instructions] With that, let me now for the first time, hand you over to our new CEO, Christian Kötz.
Christian Kotz: Thank you, Max, and welcome -- a very warm welcome also from my side to everyone online. Thank you for joining us today. I'm actually glad to have the chance to join this earnings call. And as Max said, for the first time as the CEO of Continental. 2025 was a year of significant transformation and delivery for Continental. We may decisive strategic progress while achieving our financial targets. As you all know, we've completed the sale of OE-related part of ContiTech business, the so-called OESL business in February 2026. With this, we have materially reduced the OEM auto exposure of ContiTech. And with this, started sales process for the remaining ContiTech business. We are continuously executing our strategy to become a pure-play tire company. So let me really summarize the key developments in Q4. Starting with sales. So in a challenging environment, we delivered organic growth of 0.8%, resulting in EUR 19.7 billion of sales. The tire contribution is actually a growth of -- organic growth of 2.4%, whereas we have seen and experienced a negative impact organically of 3.3% on the ContiTech side organically. Adjusted EBIT reached EUR 2 billion with a margin of 10.3%, mainly driven by healthy price/mix in tires as well as strict cost discipline and resilient replacement demands. So ContiTech continue to face challenging automotive and industrial markets, especially in APAC and North America with pressure on mix and volumes, particularly in Q4. The transformation, which I initially mentioned also had an impact on our result. So our NIAT was significantly burdened by special effects of around EUR 1.7 billion mainly related to the Automotive spin-off, the AUMOVIO spinoff and the transformation of ContiTech and the individual effects are shown on the chart. Adjusted cash free -- cash flow, however, came in at EUR 959 million, so at the upper end of our guidance, driven by solid operational performance, mainly in the tire sector. Thanks to the strong free cash flow generation in Q4, we further reduced net debt and improved the pro forma leverage ratio to around 2.0 as planned, as anticipated and as was also communicated at our last Capital Markets Day. So overall, I think we navigated this transition in 2025 very successfully, giving us the opportunity to return some of the earnings to our employees, but also, of course, to our shareholders. And as previously mentioned and explained, we adjusted our NIAT for noncash and nonrecurring items of a total of EUR 1.2 billion, resulting in a dividend payout basis, so an adjusted NIAT of around EUR 1.1 billion. This means we will propose a dividend for the financial year 2025 of EUR 2.70 per share to this year's Annual General Meeting for approval. The proposal reflects, therefore, our clear commitment to the target payout corridor of around 40% to 60%. As communicated at our last Capital Markets Day and the proposed dividend basically sits right in the middle of this corridor, and this ensures an attractive dividend yield of 4.8%, while maintaining financial flexibility during the ongoing transformation. So now a quick glance at the Q4 results by sector. Overall, group performance came in broadly in line with prior year. So once again, this was supported by a very strong fourth quarter in Tires. I think Roland will touch on that in more detail. Particularly proud we are that we managed to organically grow in Tires. I mentioned the total year results, but also in Q4 and to keep earnings stable despite headwinds from tariffs and FX. So now over to Roland for more details on our Q4 financials.
Roland Welzbacher: Yes. Thank you, Christian, and welcome, everyone, from my side as well. Turning now to the market environment for Tires. On Slide 7. Over the course of the year, the replacement market in Europe has changed quite a bit, strong Asian imports, initially supported market volumes. But as these imports slowed, total market volumes declined year-on-year. This effect was further reinforced by tough comparisons with last year. Despite this, we achieved organic sales growth in EMEA in Q4, underscoring the resilience and strength once again of our business. I'll speak about our regional mix in more detail later on. North America and China, however, grew slightly compared to a weaker Q4 2024. Light vehicle production in China continued to show solid momentum while development in Europe and North America were more mixed. Over to Slide 8. Let me briefly focus on the truck tire markets. In Europe, truck tire replacement market showed continuous resilience also in Q4. North America picked up during the year after a slow start into '25, resulting in slight growth in Q4. This is mainly driven by the continued variable volume in commercial vehicle production in North America, so the OE business, which we also had to manage in Q4. In Europe, however, production figures continued to rebound and at least we're seeing a little bit more positive tonality from the U.S. truck OEMs as well. Over to Slide 9. Let's now discuss the Tires performance in this environment. Despite facing continued strong FX headwinds, lower volumes and a tough comparison based on the volume side, we managed to reach the prior year profitability level with sales of EUR 3.6 billion in Q4. We achieved an adjusted EBIT margin of 13.9%, supported once again by healthy price/mix of 3.4% which underlines the robustness of our business. Price/mix was once more driven by many areas, product, channel and regional mix. A mid-double-digit million euro tailwind also came from lower raw material prices. In addition, first positive impact from our portfolio measures started to provide a slight support to our adjusted EBIT margin as well. Slide 10. If we look at the regional picture on Slide 10, the underlying dynamics of our business become even clearer. We saw mixed volume trends. Positive support on the PLT side came mainly out of APAC and the U.S. and Canada, but overall, the Americas remained a challenging environment for us, particularly in the truck tire business. However, positive price/mix as well as the passenger car tire volumes in the U.S. and Canada helped to stabilize our results even though on a comparably low level given the headwinds from tariffs and FX. In EMEA, negative volumes were fully offset by strong price/mix effects, also supported by a positive development in truck tires. This resulted in an organic sales growth of 1.1%. Also APAC delivered strong organic growth, driven by a recovery in both OE and replacement passenger car tires in China. This more than compensated for the loss of volumes following the closure of the truck tire business in the region. In addition, a healthy price/mix performance in the region was able to substantially offset the significant foreign exchange headwinds, which mainly came from the Chinese renminbi as well as the Australian dollar. On Slide 11, you can see the result of the ongoing mix improvement and increasing UHP share. We managed to increase the share for both Continental branded tires as well as for our broader passenger car tire portfolio. Across all brands, the UHP share now stands at 55%, up 3 percentage points compared to last year. Remaining figures were rather resilient and did not change much compared to last year, perfectly reflecting our business model. Replacement tires accounted once again for 76% of total sales. Continental branded tires represented 77% of passenger car tire sales and also our regional mix did not change materially compared to '24. Let me now turn to ContiTech on Slide 12. ContiTech continued to be impacted from a delay in market recovery. In the fourth quarter, sales declined organically by 5.2%, reflecting weak demand in the automotive business and also ongoing industrial headwinds such as the conveyor belt business in China and the North American distribution and off-highway business. Customer caution and the deferral of business orders into '26 further constrained our results towards year-end, something we saw starting to partially reverse already in Q1. The adjusted EBIT margin before IFRS 5 came in at 2% as a result, impacted by the discussed unfavorable mix as well as earlier incurred stand-alone costs coming from a faster-than-anticipated progress in the transformation and carve-out related one-offs. Very important to mention ContiTech has defined a lot of self-help measures which are firmly in place and are expected to materialize over the course of 2026. This will help to further strengthen our Industrial business, which delivered sales of EUR 4.4 billion and an adjusted EBIT margin of 7.1% in 2025. Turning now to our cash flow on Slide 13. Free cash flow in the fourth quarter was particularly strong. This was driven by the less seasonal pattern in CapEx throughout the year, disciplined cost management, and as always, on the Tire side, a strong cash inflow from working capital in Q4, mainly driven from the winter tire business in Europe. And just some further comments on the bridge. The EBITDA decline year-on-year was mainly due to noncash restructuring and transformation costs. You can see the offsetting effects in the other line. Slide 14 highlights the positive impact of our strong cash generation on the balance sheet. Working capital followed. As I said, its typical seasonal pattern in Q4, clearly decreasing after a buildup in the previous quarters. The change compared to prior year, however, is mainly driven by the accounting change for OESL. Their assets and liabilities are now classified as held for sale, therefore, no longer part of our working capital. Without this, it would have remained broadly unchanged compared with the prior year. As a result of the Q4 cash flow, our net debt declined in the first quarter, resulting in a pro forma leverage ratio of around 2.0 fully in line with our expectations that we have already communicated during the 2025 Capital Market Day. Let me now turn to our market outlook for '26 on Slide 15. This year, light vehicle production is currently forecasted to remain below last year's level in our key markets in Europe and North America and even in China, resulting in our expectation of slight decline in OE production worldwide. Passenger car replacement market forecast, however, hint towards minor growth well across all regions. And this is also true for the truck business in Europe. In the U.S., however, we're seeing a bit more mixed picture, slight rebound in commercial vehicle production throughout the year against a very weak comps of '25 should have an adverse impact on the truck replacement business, however, in that region. Overall, we are expecting no growth to very low growth environment for tires. ContiTech industrial production is expected to remain mixed. On Europe, we expect a gradual growth following periods of stagnation, while the American market remains highly volatile due to U.S. tariff measures and ongoing geopolitical tensions. Slide 16, all of this translates into our guidance for 2026, which is summarized now. On this page, it includes currently effective tariffs and is based on foreign exchange rate also at current levels. And let's be very clear, it does not yet reflect potential changes to input costs or other impacts of the recent geopolitical tensions with regard to Iran and the Middle East. For the group, we expect sales of around EUR 17.3 billion to EUR 18.9 billion with an adjusted EBIT margin between 11% and 12.5%. This is, of course, mainly coming from Tires, where we expect sales of EUR 13.2 billion to EUR 14.2 billion and an adjusted EBIT margin in the range of 13% to 14.5%. This broad range just as for ContiTech and the group is mainly a result of the uncertainty we're seeing from the volatility in currency development, where particularly the U.S. dollar is trending into or has been trending into an unfavorable direction, the uncertain volume development also driven by the changes in tariffs and geopolitics as well as a net impact from raw material in 2026. For ContiTech, sales are expected to come in between EUR 4.2 billion and EUR 4.8 billion with margins of 7% to 8.5%. This does include the general result of OESL, which stood at EUR 117 million sales, slightly above breakeven profitability. Adjusted free cash flow is expected to be around EUR 0.8 billion to EUR 1.2 billion. This includes CapEx of around 7%, mainly driven by ongoing investments into our Tires business. PPA is going to be significantly down to around EUR 25 million per year, mainly from ContiTech. Other special effects should amount to roughly EUR 250 million, already including the deconsolidation effect from OESL as well as the expected costs associated with the sale of ContiTech. And in the current setup of Continental, we should currently anticipate to see a slightly decreased tax rate of around 24%, given the change in our country mix compared to our previous setup, including AUMOVIO. And with that, I would like to hand over now the rest of the time to you. So operator, could you please open the line for the Q&A?
Operator: [Operator Instructions] The first question comes from Akshat Kacker of JPMorgan.
Akshat Kacker: Akshat from JPMorgan. I have 3 questions, please. The first one on ContiTech margins. You mentioned, excluding OESL, the business was at 7% margins roughly in 2025, 4.6% margins in Q4. Could you just give us some more details in terms of the start of the year? How should we think about margins in Q1? And if you could help us think about the second half margin profile, how much improvement should we expect based on the cost actions that you have taken in this division last year? That's the first question. The second one is a quick one on the sales process. So the announcements last month said that the first round of bids were expected in March. Could you confirm if the process is on track? And what is the time line from here, please? And the last one on the tire business. You have talked about some kind of pressure in the Americas, which is similar to what we've heard from your peers in terms of higher inventories and sell outcomes in that region. Could you talk about overall pricing for Conti in that market? You were successful in increasing prices against tariffs last year? Do you see those price increases sticking in the U.S. market?
Roland Welzbacher: All right. Akshat, I'm going to take the first one. We thought about how to put more flavor on the Q1 expectations on ContiTech, and it's a little bit difficult because there is no Q1 '25 we can refer to. So what we would like to do instead is guide you a little bit compared to Q4. So in order to allow for like-for-like comparison, excluding OESL, we're focusing on the sequential development. In the last 3 months, we still did not see a material improvement in the industrial sector, even expecting volumes to be slightly down in Q1. The anticipated mix improvements I talked about earlier, however, should help to compensate for most of the lost volume on both the top and the bottom line. FX should presumably not be a factor sequentially. In addition, we're expecting a low to mid-double-digit contribution from not repeating negative one-offs in Q4 as well as some onetime safeguarding measures in Q1, helping the bottom line to clearly improve versus Q4. Nevertheless, we still most likely will not be able to reach the lower end of our EBIT guidance for the full year already in Q1. This is true for the industrial business itself, but also because we see the EUR 170 million January sales contribution from OESL just above breakeven, also going into our Q1 results, given the closing only happened beginning of February. Now we talked about the second half. So despite the fact that the margin is not yet in the guidance range, the year is starting as planned. So we see stepwise improvements in the upcoming quarters, also supported by continued safeguarding and restructuring measures, which we have already put in place and where we expect benefits coming through, specifically in the second half. So number two, M&A process. We started the M&A process. We reached out to investors already in December and then started the full-pron process. In Jan end indeed, we're expecting offers to come in, in March. Now it remains to be seen right now, we're on track in terms of timing, and we still believe we can close the transaction within the year 2026.
Christian Kotz: Yes. So let me jump in then here. Akshat, by the way, from my side, as well. Just to add in maybe on point number two and also in anticipation of maybe a potential follow-up question. So we also don't really see that the current military conflict in the Middle East is impacting our process to sell ContiTech. So if this is a question you might have or concern you might have we really don't see an impact for the time being. And to your third point, Tire business in the U.S., first of all, let me differentiate between the 2, let me say, burdens or the pressure points. One country-specific pressure points and the other one on the other side are the more generic industry pressure points. So the country-specific pressure points are very much related to the fact, as you all know, we are importing quite a number of tires from Europe. So our business was under pressure, is under pressure in the U.S. simply due to FX. So producing in euro and selling in dollar is obviously much less interesting and attractive as it is used to be. And number 2, the tariffs are impacting us potentially a little stronger than the one or the other competitor. Those are the country-specific pressure points, which put the burden on our results and are challenging us. Let me say, the second part are then more the generic industry pressure points. So the weak market demand plus the high pressure from the imports. Are we able to offset those impacts? I mean I'm not going to comment on pricing stand-alone. Clearly, we continue to focus on finding the sweet spot in terms of price mix and volume and being still underrepresented, as you know, in the U.S., mainly in the U.S. and Canada. We do believe we have good opportunities to find the sweet spot and finding ways offsetting these negative pain points, let me say, as good as we can. An environment, which is definitely specifically in Q1 still challenging because you compare in Q1 than still last year quarter without tariffs versus this year, a quarter with tariffs, last year, a quarter with exchange rates, which were still favorable versus this year, a quarter with very unfavorable exchange rate effects. So challenges, specifically in the U.S. in Q2 and Q1, but optimistic to sequentially improve during the course of the year.
Operator: Then we are moving on to the next question. Next question comes from Christoph Laskawi from Deutsche Bank.
Christoph Laskawi: The first one on the exposure to energy costs, please. We've seen, obviously, oil and gas prices spiking this week and thinking back to end of '22 when the debate around the inflation around gas prices, in particular, back then, it would be great to get a refresher of roughly the euro amount exposure as a percent of sales in absolute terms in your sourcing? And also in general, how you manage to pass these on to customers potentially in the past? And also how you source these essentially oil and gas for heating in the production, et cetera? Is it hedged throughout the year? Or are you closely aligned to spot? And then the second question on more shorter-term tires, please. One of your competitors was very negative on volumes in Q1 [indiscernible] said they don't share that. Could you comment too? Do you see the market down 10% or is it better? It's probably fair to assume volumes down in Q1. Could you comment on inventories and how you generally see entire Q1 trading? And if we should assume you are in the guidance range or would be rather on the door and if you can make a comment at this point at all?
Roland Welzbacher: All right, Christoph, it's Roland here. Let me take the first one. Your questions about the energy cost. Let me approach this from a slightly different angle. So across Continental and in each sector, basically, tires kind of take energy-related purchasing accounted to clearly below 5% of the total ticket mix of the total purchasing volume, of which natural gas and electricity account for roughly 75%. So 5% of purchasing is energy, 75% of the 5% is the natural gas and electricity. Now we have seen gas prices doubling in the last couple of days. So it remains to be seen whether this higher level will then be sustainable or not? That's a key question for us with regard to the impact on our financials, obviously. The same is true for oil prices. So currently, we see an increased level of oil prices and it remains to be seen for how long the crisis continues and whether we see it a long period of time, high oil price levels, which will then have, of course, an impact on our financials. And again, same as you remember last time, it was tariffs and FX. We put in mitigation measures in place, same here, if we would see an elevated level now coming from the crisis going into our raw material and in energy prices. And obviously, we would look for offsetting measures on the cost side as well as market related. And usually, part of is covered with indexation clauses in certain contracts with customers and a certain part is not. Before we turn to Christian for the volumes, let me pick up your last question on a little bit more flavor in Q1 tires in general. What we expect now is indeed that volumes remain weak. We have seen that already in Jan and in Feb. To some extent, we believe March is going to be better, but still volumes will be somewhat disappointing. But we also see price/mix coming in strong and potentially offset the volume negative. And what we see and already anticipated because we're in Q1 now and Q1 last year was a completely different environment in terms of FX that we have strong headwind on the FX side. Now going into a P&L. In Q1, the U.S. dollar has slightly come down a little bit over the last 2 days. We don't know whether this is going to be sustainable or even continues and would have a slightly offsetting effect that remains to be seen. But for now, we expect this to be, again, a drag on our Q1 financials. You know that we are looking forward for the raw material tailwinds we have seen in Q4 continuing now into Q1. We have slightly offsetting effect potentially from reevaluation of stocks if the raw materials have declined now our period of time. On the tariff side, again, the cross effect is similar to Q4. And you know that wages and other input costs, logistics costs were also going up. Again, we have an inflation effect and, of course, a negative consequence then on our financials.
Christian Kotz: Yes. I mean, Roland, obviously, a very comprehensive answer. Let me just add 1 or 2 things maybe. So Christoph, you asked specifically for the volumes, inventory levels, I think Roland already alluded to the fact that, yes, we believe Q1 from a volume standpoint, probably below last year for various reasons, the OE business is not starting off strong. You see probably also the OE volumes in China since quite a while, maybe not as strongly developing as we used to see it during the course of last year. We had some special effects. So the winter storms in the U.S. did not have -- to have a strong start into the year. We had, as you all know, also in Europe, pretty challenging, let me say, weather conditions which are not necessarily good for sell-in. Nevertheless, we do believe that these conditions have been good or are good for the total year because it helps our customers to sell off inventory. So we believe the inventories are trending towards a more favorable situation. So all in all, and I tried to explain this earlier, most probably -- and we believe Q1 will be the most challenging quarter of this year we are facing. Is it in the guidance range or without the guidance range, to be honest, it's too early to tell. I mean you also know that even in Q1, the seasonality is pretty strong. March is the dominating months within this first quarter. So it depends very much now on how March will come in plus many other effects. But yes, Q1 is the most challenging quarter from today's perspective.
Christoph Laskawi: And if I might sneak in 1 follow-up just on the tire bridge, obviously, because it's discussed a lot currently. On your assumption for the positive raw materials, is it fair to assume around mid-double digits, mid- to high-double digits is factored in the guide as a positive? Or is it smaller than that?
Roland Welzbacher: I would say mid to high, pretty much our expectation. As I said, we're still trying to understand some reevaluation effects on the stock side, which already offset this, but I would say this is also broadly in line with our expectation.
Operator: The next question comes Ross MacDonald of Citi.
Ross MacDonald: It's Ross MacDonald at Citi. I have 3 questions, please. The first one, just linked to Christoph's question around 2022, and obviously, the experience around some of the shocks we saw back then. Obviously, this is a different conflict. But one thing that stood out back in 2022 for Conti was the impact of marine shipping rates. I know these haven't been rising too much, but can you maybe speak around how hedged you are for the next 12 months on the marine shipping side, just in case we see any inflation in spot rates on the logistics piece? The second one on FX, on the tire bridge. Could you maybe give us your assumptions around the USD rate you're assuming in the bridge there and potentially the drop-through from FX to EBIT that we should assume from the modeling side? And then a final one, just again a modeling question. On the other/consolidation line, I think it dropped to a very low level in Q4, how should we model that for 2026, please, on revenues and EBIT for new leaner Conti?
Roland Welzbacher: All right. Let me start with the FX question. First of all, the drop rate in '26 will not be so much different from the drop rate in '25. It's usually between 40% and 50%. On the -- in Q1, FX will be substantial the effect because we started the U.S. dollar last year at [ 104 ]. And then in Q1, it was still pretty strong and then it got a lot weaker. And now compared to Q1 '26 with Q1 '25, we expect a significant FX headwinds going into P&L, probably more significant to what we have seen in Q4 last year. On the consolidation side, I'm not sure whether I understood.
Christian Kotz: Yes. behavior, let me just add on that. I think what we've seen in Q4 on the other or holding line slightly or very low amount mainly to a revaluation of some accruals as well as some transformation-related charges that we could make. So this is nothing that we would see on a sustainable level. So if you would look into our 2026 assumptions, we are rather looking into, let's say, EUR 150 million-ish cost item on the holding side, obviously, very much depending on how stand-alone costs were developed at which point we will look into stand-alone cost. But I think this should be a fair ballpark for you to look at.
Roland Welzbacher: Maybe then some -- just one -- some comments and Ross, by the way, I -- 1 or 2 comments on your first question, especially with regard to logistic costs and the potential impact. So obviously, as you all know, the region is not necessarily primarily relevant for us. We generate less than 1% of sales in that region. But the direct impact or the indirect impact on our P&L via raw material cost and logistics and/or logistic cost is what we need to obviously take a very close look. And let me say, evaluate and supervise the situation carefully. I mean, as you said, we don't necessarily see a jump in the energy costs or the shipping costs yet. I think it is very much dependent, to be honest. So the Strait of Hormuz is not relevant here. It's a question of whether you see an impact on to the Suez canal. So longer delivery times, supply versus demand evaluation or development, which might impact us. But this can also be besides being a challenge at a potential negative cost impact, it could also be a significant opportunity, because for the ones producing in the market for the market and this is what we have done and concentrated on since so many years, we are for sure much less exposed through those logistic costs that many other, especially the big importers. So yes, it's an area which can create besides material costs, second burden -- cost burden. On the other side, we should be like some others significantly underexposed to these costs, and that can also, therefore, drive an opportunity and not just a challenge.
Operator: [Operator Instructions] The next question is from Harry Martin of Bernstein.
Harry Martin: The first one, I just wanted to push a little bit more on the ContiTech margin. If I look at Slide 15, it actually shows industrial production was up in every region this year, but the margins ex-OESL have kept coming down. So I mean what really gives the conviction that you can have the step-up in margin in 2026, when as you point out, the industrial production growth isn't a significant accelerator and maybe just some color on which are the really high-margin regions or product lines that need to come back for the new guidance to be hit. And then on the tire side, I just wanted to ask the expectation for volumes to be around flat for the full year. That's probably a touch below some of the peers that have reported. We've heard from 2 of the largest players in the industry, they're going to have a big step-up in new product launches this year versus last year. Perhaps is that why they expect some volume share gain? Or do you have a similar step-up in new products as well?
Roland Welzbacher: Do you want to start with the first one? Roland here. Let me take the ContiTech question. Different Q1 was the expectation, '26. So if we look at what didn't went well or was remained pretty soft on ContiTech in Q4 in terms of market segments that was...
Operator: So ladies and gentlemen, here's the operator, the sound seems to be missing. We seem to have some sort of issues here. Dear speakers, can you hear me? Are you still there?
Roland Welzbacher: Maybe this works on the backup line, no?
Operator: Yes, this works perfect.
Roland Welzbacher: Sorry, we lost the connection somehow. And I don't know, Harry, where did you lose us?
Harry Martin: Right at the beginning of your answer.
Roland Welzbacher: Of my answer. So you got -- correct?
Harry Martin: No, I think it dropped at the very beginning when Roland started talking about which segments were the weakness in Q4.
Roland Welzbacher: Let me repeat, no problem at all. So I said -- the question was about Q4 and then what sector specifically would need to increase in the '26 in order to bring us to the point where we wanted to be. So the industrial business is burdened in most of the business areas, so ContiTech in Q4, that is energy, construction, mining, auto aftermarket. And if you look specifically, which needs to turn around, those who were specifically weak in Q4, that is APAC, particularly China, continue to be difficult. The American Off-Highway business remains soft as well and the distribution business, which is a high-margin business for us, also experienced unexpected weaknesses towards the end of the year. And this needs to rebound. So we first signs talking to customers, the confidence is growing. We also see first light at the end of the tunnel, looking at our order book in '26, although Jan and Feb remained also somehow soft. We see first signs that are going to improve, and it will be a stepwise process.
Christian Kotz: Okay. And then I was trying to comment on your second question with regards to the volume expectations. So first, yes, we basically assume stable volumes for us year-over-year on the PLT side, but basically also on the truck side with significant nuances, so to speak, region by region, segment by segment. And yes, we are also launching new products in order to be able to at least defend our market share or gain market shares. So if markets do recover stronger than what we anticipate and what we have explained. We do believe we might also have then some volume chances. And just to highlight some examples, we are in process of just launching in the U.S. our very first all-weather tire, the Secure Contact AW, where we have very nice preorder book and where we are cautious in terms of our forecast. So we might have some opportunities, but we are also launching new truck tires, bus tires, like the Efficient Pro in Europe, which is clearly outperforming the industry on the commercial vehicle OE business side or we are investing significantly in terms of size range, not only in Conti, but also in all of our second and third line brands in the area of UHP tires. So yes, we are cautious. I mean, we have seen in the last couple of years that being too optimistic on volume side has proven to be a challenge, and that's why we consciously decided to take a more conservative approach. If markets do recover stronger than what we account for, we believe we are well prepared as far as our product portfolio, our product performance is concerned to also benefit then from a potentially stronger rebound of the market. And apologies for the technical challenges.
Operator: So dear ladies and gentlemen, at the moment, there are no further questions in the queue. But before that, I have seen a question shortly appearing from Monica Bosio. [Operator Instructions] I see a follow-up from Ross McDonald, Citi here.
Ross MacDonald: I'll make most of this opportunity to ask 2 follow-up questions. Maybe a longer-term question, given you've just taken over responsibilities as CEO. Could you maybe update us on your strategic priorities? Obviously, ContiTech sale and navigating this geopolitical uncertainty I imagine is the key focus maybe longer term, if you can give some words on what stamp you want to leave on the business and how we should think about the group segments, whether you would look at inorganic growth, maybe M&A in some specialty categories we'd be interested on the long-term vision. I know we've just had the CMD last year, but potentially an update there? And then secondly, linked to the ContiTech sale, you've obviously been very generous with the dividend this year. But how should we think about as and when that deal is done, how you think about the split between de-gearing special dividend, if applicable, and buybacks? Those would be my 2 questions.
Christian Kotz: Yes. Okay. Thank you, Ross. Let me take the first one, and then we can probably share the second one. Roland and I saw more on the long-term side. I mean, as you know, I'm new in the CEO role, but I'm not new in the tire area. So you will not see significant surprises for me how I want to drive and how I believe we should develop the tire business. So first priority, obviously, now is to successfully complete the transformation. And we all know these are challenging tasks. We are very, to a certain extent, proud that we accomplished everything we have accomplished in 2025, even though we only had really very limited time. So successfully spinning AUMOVIO successfully now closing the OESL gives us really confidence that we can close this transformation during the course of 2026. Then obviously, a second priority, which goes in parallel is to further optimize, let me say, healthiness -- the organic healthiness of our tire business which partly goes also into your second question. So how can we optimize and yes, further improve our balance sheet, but how can we also further optimize our organic operational performance? And there, clearly, the focus is on, as we always mentioned and as we explained also at the Capital Markets Day, on the one side, the very consistent and consequent focus on the UHP tire development and the business development where we still see lots of opportunities, you will see us to continue to consequently focus on our portfolio. We have done quite some steps also there during the course of last year. So as you know, we've exited our agricultural business. We have closed 2 facilities, truck tire production in India and our facility in Malaysia. We have optimized -- further optimized our retail footprint with some significant adjustments. We're in process of closing our textile production in the U.S., and you will see us to do some further steps in order to optimize, let me say, our operational performance without any inorganic shape. And then third, and I can only then repeat what I said in the past. We do believe at the end of this transition, we are then a very, very healthy tire company, very solidly financed with strong operational performance, this should bring us into the situation that in case consolidation takes place, in case there are reasonable and justifiable inorganic growth opportunities we should be ready to be able to participate, and we would actively look for opportunities. But as I mentioned in the past and I can only repeat myself, it needs to make financial sense. It needs to be complementary and we will see whether those opportunities will arise, yes or no. But clear, we want to be fit for that and ready for opportunities in case they might arise. So then your second question was on the utilization of the potential proceeds. I mean before Roland chips in and this relates and also to what I said earlier, obviously, we were partly in line with what we communicated at the Capital Markets Day. We will use these proceeds really in 2 ways: one, to improve our balance sheet and second, to also let our shareholders participate. So how we do this and which shape, we do this, we will need to decide. Roland, anything to add there from your side?
Roland Welzbacher: Not really much to add just probably in terms of timing. First of all, what we need in order to approach this decision-making process is more visibility on the potential proceeds of the ContiTech sale. And then we can better assess what the right way and right format would be. That's all.
Christian Kotz: And I hope the voice quality is okay because we are really working with...
Operator: I can hear you quite well.
Christian Kotz: Is it okay? Good. Good to know.
Operator: Yes, yes, we can hear you very well. The next question is from Monica Bosio, Intesa Sanpaolo.
Monica Bosio: Yes. Sorry, maybe I lost a part of the speech. But I just wanted to ask if you -- so the company is expecting tailwinds in raw materials obviously, now the situation could change. But as things are, can you quantify the raw material tailwinds? And I was just wondering if you have a sort of sensitivity in terms of price -- petrol price per barrel on the raw material side, in general. And my second question is on the PLT tires, the shares of the ultra high performance tires you are guiding for flat volumes, both in passenger cars and trucks, but can you please just give us some flavor on the volume trend in the ultra high performance tires maybe 1%, 2% something similar. And what do you expect to gain market share the most in terms of geographical area if I may ask?
Christian Kotz: So where do we start? I can start maybe from the back. On the UHP side, so obviously, you are right. We -- and even though we count on that market, we do believe that we have significant UHP growth opportunities. We believe the markets will grow annually by roughly 8% CAGR. That's what we assume in terms of global UHP growth. And obviously, we don't want to lose market share. We want to rather gain market share. But this gives you -- even if we would only grow in line with the market, the growth rates we should accomplish in the area of UHP tires and the share of UHP tires of our total business, I think this was in the presentation all the details are in the 55% for our total portfolio, I think, 65% or 62%, sorry, of our Continental branded business. And this should further significantly increase. Market share gains besides UHP, I mean, you know, we generated 53% of our total business last year in the EMEA region, 33% in Americas and 14% in APAC. So obviously, it will be probably difficult to gain relevant market shares in the EMEA region, where we are definitely more in the defending mode, whereas we have significant growth opportunities with the market, but beyond the market by gaining market share in the Americas, focusing on North America and in Asia, given the size of the market relative to the share of our total business, I think it becomes very clear that we have the significant growth opportunities.
Roland Welzbacher: Let me continue, Monica, Roland here with your question on raw mat and oil price and assumptions and so on. So let me start with the raw mat impact. As I said earlier, in Q1, we're expecting a mid- to high-double-digit euro million amount then probably partially offset by some revaluation effect on the stocks. For the full year, then obviously, it's going to fade out substantially in the second half. So for the full year, it would still be a triple-digit euro million amount, the base assumption. So big plus in the first half and then leveling out in the second half. Now that was before Iran. That's a pre-Iran situation. So also on the oil prices, we anticipated that basically the level of Jan and Feb will basically continue throughout the year. It remains to be seen now to what level and which level is sustainable throughout the year '26. And if it would be a substantially higher level than we initially assumed. And obviously, we have a lot of less tailwind on the raw material side. And then we would also have to look into measures in order to bring down costs in other areas and also then look at market-based mitigation measures like we did with tariffs and FX last year. Does that answer your question?
Monica Bosio: Okay. Yes.
Operator: The last question for today, a follow-up from Akshat Kacker again.
Akshat Kacker: Akshat from JPMorgan. A couple of quick follow-ups. The first one on the free cash flow bridge. Could you just share your expectations around the different elements? You clearly expect EBITDA to improve year-over-year, absolute CapEx is expected to be higher, so that might be an offset. Do you see any room for working capital optimization or improvement with your free cash flow guide for 2026? That's the first one. And the second one, a follow-up on the tire bridge. You talk about business inflation being partly offset by portfolio measures. Could you just give us some more details on expected business inflation this year and how much of that can be offset?
Roland Welzbacher: Yes. Akshat -- let me -- Roland here. Let me take the first question on the cash flow. I think you would expect some improvement on the EBITDA side, obviously, because this must be our target for this year to improve earnings and we have all the right measures in place to be able to do that. CapEx, I would say, slightly increased in terms of percentage on net sales as well as an absolute amount, not a big step but slightly increased. And then on working capital side, I would not see much room for movement or contribution. So that's my view on cash flow. And your second question?
Christian Kotz: I think if I got it right, Akshat, you asked for how much of the general -- I mean, in my words, how much of the general inflation we feel we can offset with portfolio measures, more or less, was this the question?
Akshat Kacker: Yes, please.
Christian Kotz: Okay. So I mean if you take a look at 2025 without going into the details, we had obviously some -- I mean we had the general inflation effect. And we had some on the cost side, especially on the period expense side. And we had some, let me say, compensating effects. One is, as much as FX overall hurts. It obviously helps a little bit to offset and compensate the inflation in euros. And the second part is the portfolio measures. And we more or less for 2025 kept, therefore, our costs in euros -- the fixed costs roughly stable. Very, very little inflation. So dependent on how things will develop in 2026, we definitely have the intent to get to, hopefully, similar levels but it remains to be seen, obviously, on the one side, what happens to the FX. So it helps us on the cost side. It hurts us on the sales side. If I can wish, then I definitely wish for a stronger dollar for the bottom line. And second part is how much of the pending portfolio measures we are working on. And you know, for example, we are working on trying to sell our retail operations in France, which would have a pretty significant impact depending on how much progress we can accomplish in all of those projects. Intent continues to be to offset at best, all of the inflationary effects, but too early to quantify now.
Operator: Thank you all so very much for my side, ladies and gentlemen. As there are no questions in the queue, I am closing the Q&A session and handing the floor back over to your host.
Max Westmeyer: Yes. Thank you very much, spot on in terms of timing. Thank you all for participating in today's call. And sorry again for the technical difficulties. As always, we, on the Continental Investor Relations site are available, should you have any follow-up questions. And as I mentioned already, our annual report with all the details around 2025 will be published on March 19. With that, we conclude today's call. Thank you very much, and goodbye.