Schffler continues good performance

2013-11-11 | 000-004-652 DE-EN

SCHAEFFLER AG, HERZOGENAURACH

Schaeffler continues good performance

Revenue of 8.4 billion at prior year level

Automotive revenue +7%, Industrial revenue -12%

EBIT margin before one-time charges remains at approximately 13%

Free cash flow significantly improved to 589 million

International automotive and industrial supplier Schaeffler held its ground in a challenging market environment over the first nine months of this year. At 8.4 billion, revenue for the period up to September 30 matched last year's figure despite the negative impact of exchange rates. When not accounting for the impact of foreign exchange rates, revenue was up approximately two percent. Schaeffler Group's revenue for the third quarter grew 1.5 percent to 2.8 billion compared to the same period last year. When excluding the negative impact of foreign exchange rates, revenue in the third quarter increased by around five percent.

Our business continued to develop very solidly during the third quarter. The Automotive business again grew considerably faster than the market. Our Industrial business stabilized slightly, although it has not yet reached a turning point. We have maintained our high level of profitability despite the challenging environment, stated Klaus Rosenfeld, CEO of Schaeffler AG. New customer projects and product innovations enabled the Automotive division to increase its revenue by approximately seven percent to around 6.1 billion, again achieving a growth rate significantly above the general market trend. Industrial division revenue declined by approximately 12 percent to 2.3 billion due to market-related uncertainties and the persistently weak investment climate.

EBIT for the first nine months of 2013 fell by 106 million from the prior year period to 1.0 billion (prior year: 1.1 billion). The primary reasons for the decline are the drop in Industrial division revenue and 48 million in expenses incurred in connection with personnel-related structural measures at the company's production locations in Schweinfurt and Wuppertal. These efficiency improvement programs are aimed at adapting capacities to changing market conditions and improving the company's organizational and cost structures. Including these provisions, the EBIT margin for the period up to September 30 amounted to 12.3 percent. Excluding the one-time charge, Schaeffler maintained its EBIT margin at 12.9 percent. Net income for the period increased to 1,020 million (prior year: 729 million).

Cash flow from operations increased significantly by about 17 percent to 919 million (prior year: 783 million). Cash spent on investments was 330 million (prior year: 661 million). Given these changes, free cash flow for the first nine months of 2013 rose to 589 million (prior year: 122 million).

Net financial debt at the end of the third quarter had decreased by 1.1 billion to approximately 5.7 billion compared to December 31, 2012. Schaeffler Group again significantly reduced its debt during the third quarter by using excess free cash flow and the proceeds from the disposal of approximately two percent of Continental AG shares to repay debt. As a result, the company's debt to EBITDA ratio (ratio of net financial debt to EBITDA for the last twelve months) decreased to 2.8 as of September 30, 2013 (December 31, 2012: 3.2).

Outlook for 2013

Schaeffler Group continues to expect the Automotive division's revenue to grow significantly above the level of the market. The industrial goods market did not recover as had been anticipated up until the mid-year point. Recovery of demand in the industrial sectors is not expected over the fourth quarter of 2013, particularly not in Europe and the Asia/Pacific region. We expect growth of the Automotive division for 2013 to remain at the high level seen during the first nine months. In the Industrial division, we are anticipating revenue levels to continue to stabilize towards the end of the year, Rosenfeld stated.

Against this backdrop, Schaeffler Group expects operational revenue to grow by around one to two percent in 2013 compared to the prior year. When accounting for the impact of foreign exchange rates, the company is forecasting revenue at the same level as the prior year. Based on the stable earnings of the Automotive division and despite the persistent weakness of the market for industrial goods, Schaeffler is still expecting an EBIT margin, excluding the one-time cost of the restructuring projects, of around 13 percent for 2013, thus meeting the target for this year.

Forward-looking statements and projections

Certain statements in this press release are forward-looking statements. By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. These risks, uncertainties and assumptions could adversely affect the outcome and financial consequences of the plans and events described herein. No one undertakes any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. You should not place any undue reliance on forward-looking statements which speak only as of the date of this press release. Statements contained in this press release regarding past trends or events should not be taken as representation that such trends or events will continue in the future. The cautionary statements set out above should be considered in connection with any subsequent written or oral forward-looking statements that Schaeffler, or persons acting on its behalf, may issue.

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