Schaeffler shares significantly firmer: profit warning despite increase in sales

The SDAX company intends to increase its currency-adjusted sales by 6 to 8 percent in the current year after suspending the original forecast due to the Ukraine war. In the first quarter, the supplier made gains, especially in the industrial business, while rising costs weighed on the result.

Nevertheless, the news was well received on the stock exchange: Via XETRA, the Schaeffler share temporarily rose by 4.55 percent to 5.22 euros. The losses this year now add up to just over a quarter.

For the current financial year, the company is targeting a profit margin before interest and taxes of between 5 and 7 percent, adjusted for special effects, as announced on Monday evening in Herzogenaurach. Before inflows and outflows for takeovers and sales of parts of the company, the management headed by Klaus Rosenfeld is aiming for a cash inflow of more than 250 million euros, which is likely to remain well below the previous year’s figure of 523 million euros. Sales should increase significantly, especially in the industrial division. In terms of the margin, however, the Group is assuming worse values ​​than in the previous year in all segments.

Originally, Schaeffler had set itself the goal of increasing sales by 7 to 9 percent this year and achieving an adjusted operating margin of 6 to 8 percent. The company conceded these goals again in March. Analysts polled by Bloomberg most recently expected around 6 percent growth in sales this year and an operating margin of just over 7 percent.

“We believe the company is again setting the lower limit for the current year with its forecast,” writes analyst Jose Asumendi from the US bank JPMorgan. This applies in particular to the expected margin for the auto parts business. According to Asumendi, market expectations are at the upper limit of Schaeffler’s forecast – the analyst considers this to be realistic.

In the past first quarter, Schaeffler was able to increase its sales slightly. According to preliminary figures, sales increased by 5.6 percent year-on-year to just under 3.8 billion euros. However, without exchange rate effects, the group would have only grown by 1.9 percent.

Currency-adjusted sales in Schaeffler’s most important segment, the supply to the automotive industry, even fell by more than three percent. This is where the Group manufactures components for engines, transmissions and chassis. Things went better in the profitable maintenance business, where revenues excluding exchange rate effects increased by a good two percent. The division with supplies for industry, in which Schaeffler offers, among other things, rolling bearings for industrial machines, wind power plants and aircraft turbines, grew the strongest with a currency-adjusted increase of almost 16 percent.

As a result, Schaeffler felt the outbreak of war in Ukraine and the problems in the supply chains. Group earnings before interest and taxes, adjusted for special effects, fell by a good third to EUR 258 ​​million. The corresponding margin fell from 11.2 percent to 6.9 percent. Before deposits and payments for takeovers and the sale of parts of the company, the company had only 14 million euros in free funds (free cash flow), compared to 130 million euros a year ago. The bottom line is that profits fell by 42 percent to 136 million euros.

Schaeffler’s sales were better than the market expected, wrote analyst Juan Perez-Carrascosa from the Swiss bank UBS in an initial assessment. The operating result of the automotive supplier met the consensus estimate. In addition, Schaeffler clearly beat the competition in the industrial and maintenance business. The analyst attributes the weaker result in the auto supply sector to the reduced production of the manufacturers.

/jcf/ngu/mis

HERZOGENRAURACH (dpa-AFX)

Image sources: Schaeffler Group