A trek to Stuttgart was needed to feel the pain of one of Germany´s finest. Robert Bosch has been taking a bashing in the recession. The word was that the grand old boy of the auto component sector was going to own up to making a loss in the first quarter.
Were it to be true, and were the losses to persist for the year, it would be the first full-year loss since the war (barring the faintest smudge of red ink in 1993). Quite a moment for the 123-year-old operation. Sure enough, the admission came during the annual financial press conference – now quite a lavish bash after years of hiding from the pubic gaze. As a charitable foundation rather than a listed company, Bosch was able to do that.
Chairman Franz Fehrenbach does not lose a moment and cracks straight into the confession: “Our business environment has taken a dramatic turn for the worse…we are cutting back at all levels…we have had to accept a steep drop in 2008…2009 will be one of the toughest years in our corporate history…we were in the red for the first quarter.”
Bosch has taken some pride over the years in balancing up the business so that it was not heavily exposed to the cyclicality of the auto industry. All those consumer hand tools and building technology products were supposed to shield the company from automotive losses. Not in this environment, they won’t, the whole job has gone to hell in a handcart.
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None of that is to say that Bosch is damaged. It isn’t. There was more than EUR6bn of free cash on the balance sheet at the end of the year.
The profit before tax for 2008 was a miserable EUR942m compared to the EUR3,801 a year earlier.
That was on sales of EUR45bn (of which EUR26bn was automotive). Of the potential for a loss in 2009 Fehrenbach says that first quarter sales were down 21%. He is planning for 15% down over the year and on that basis he might be able to call a profit but it will require a pretty substantial bounce in the second half to get there. He expects second half sales to be down by a maximum of 3% which would be a result. He saw a 20% decline in the last quarter of 2008.
He reckons he has had no loss of market share but that Bosch has been knocked off course a bit by the shift to small cars caused by the scrapping incentives across Europe. Bosch is big in oil burners and small cars are typically not diesel.
One of the things that Bosch will do to avoid losses building up into debt is to cool down on acquisitions. Fehrenbach has been very busy over the years mopping up competitors and getting better vertical integration (such as abrasive materials for the power tool business). Last year the Bosch boys dished out EUR3.2bn to buy other companies. That will grind to a halt while the chill winds blow.
It will come back though. Bosch reckons that it will be two to three years before growth resumes.
Rob Golding
NB Bosch Q1 results will be declared on April 27
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