Schaeffler says its revenue for the first nine months of 2016 grew to approximately EUR10.0bn. At constant currency, this represents a growth rate of 2.7%. The company’s EBIT margin improved by 0.2 percentage points to 12.8% (prior year: 12.6%), while net income was up 29% at EUR672m (prior year: EUR521m). The main driver of this growth was the strong automotive business, while the Industrial business continued to decline, facing a weak market environment.
“Thanks to our strong automotive business, the Schaeffler Group has once again developed well in the 3rd quarter of 2016. We have continued to grow profitably despite a challenging market environment,” Klaus Rosenfeld, CEO of Schaeffler AG, said.
The automotive business reported revenue growth for the first nine months of 2016 of 5.3% at constant currency compared to the prior year (+2.6% including the impact of currency translation), outpacing the increase in production volumes of passenger cars and light commercial vehicles (+3.4%). From a regional perspective, strong demand in Greater China and Asia/Pacific were the main contributors to this growth, Schaeffler said.
The market environment of the company’s Industrial business continued to prove challenging. Revenue for the first nine months of 2016 declined 5.3% at constant currency (-7.1% including the impact of currency translation). While the wind, two wheelers, and aerospace sectors were able to grow their revenue, revenue was adversely affected by low levels of demand, primarily in the raw materials and rail sectors.
Revenue trends varied across regions. Revenue in the Europe region was up 1.7% at constant currency (+0.5% including the impact of currency translation). Driven by the buoyant automotive business, revenue in the Greater China and Asia/Pacific regions increased significantly at constant currency, rising by 10.5% (+5.5% including the impact of currency translation) and 4.4% (+2.9% including the impact of currency translation), respectively. The Americas region reported a slight revenue decline of 0.4% at constant currency (-5.0% including the impact of currency translation).
EBIT (earnings before interest and taxes) rose slightly by 2.0% to EUR1,276m compared to the prior year. The EBIT margin increased from 12.6% to 12.8%. The automotive business generated an EBIT margin of 14.3% in the first nine months of 2016 (prior year: 13.4%). The Industrial EBIT margin for the same period was 7.6% (prior year: 10.0%).
Financial result improved from minus EUR462m to minus EUR320m. These developments resulted in net income of EUR672m (prior year: EUR521m).
The Schaeffler Group increased its cash flows from operating activities to EUR1,305m in the first nine months of 2016 (prior year: EUR912m). The company made capital expenditures of EUR829m (prior year: EUR743m). The capex ratio, i.e. capital expenditures as a percentage of consolidated revenue, amounted to 8.3% (prior year: 7.5%). “We mainly invested in technical equipment and machinery in the Europe and Greater China regions. Despite the high level of capital expenditures, our free cash flow increased by EUR287m to EUR479m,” explained CFO Dr. Ulrich Hauck.
The company was able to significantly lower its net financial debt by EUR2.0bn to EUR2.9bn (31 December 2015: EUR4.9m) as at 30 September 2016. This decrease has improved the ratio of net debt to EBITDA before special items to 1.2 (31 December 2015: 2.1). The reduction in net financial debt resulted primarily from the prepayment of a loan receivable from IHO Holding of approximately EUR1.7bn.
The company has confirmed its guidance for 2016 as a whole. “We still expect to meet our annual targets for 2016 despite the different trends in our Automotive and Industrial divisions,” Rosenfeld said. For 2016 as a whole, the Schaeffler Group is anticipating revenue growth of 3 to 5% at constant currency, an EBIT margin of 12 to 13% before special items, and free cash flow of approximately EUR600m.