Schaeffler profit warning sparks sector worries
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Jun 28,2017
A profit warning from German manufacturing group Schaeffler sent tremors through the industry on Tuesday after the car parts supplier complained of “pricing pressures” from carmakers. Shares in Schaeffler, a leader in the supply of ball bearings and other essential car parts, fell 11.8 per cent to €12.60 as it cut its 2017 outlook for operating profit margins. The change in outlook shook the stocks of other suppliers on investor fears that Schaeffler was suffering from a sector-wide problem, said Malte Janek Schmidt, analyst at Bankhaus Lampe. As well as the squeeze on prices by carmakers, the group blamed higher expenses in research and development, rising costs for product launches and temporary supply chain shortages, which can cause delays in the manufacturing process. In Germany, parts supplier Continental fell 3.5 per cent and car cables supplier Leoni fell 3.6 per cent. In New York, shares of propulsion technology systems maker BorgWarner opened 4 per cent lower. Arndt Ellinghorst, analyst at Evercore ISI, said Schaeffler had “a laundry list of excuses” and did not agree with the complaint on pricing pressures. “We suspect Schaeffler is caught in the crosshairs of a typical legacy business of transmission and likely making catch-all excuses,” he said. Mr Ellinghorst noted that “pricing pressure” is a “bogeymen” that can always be cited, as supplier prices typically deflate 1.5 per cent to 3 per cent a year, while electronic component prices fall 3 per cent to 4 per cent. Every car manufacturer in the world has a relationship with Schaeffler, and a typical car contains €100 of its parts inside, the company said. Late on Monday, Schaeffler cut its operating profit margin guidance, before special items, to 11-12 per cent, down from 12-13 per cent, given “a substantially lower earnings development in the second quarter”. Free cash flow generation is likely to be about €500m, versus about €600m. Earnings for the year were not cut, as volumes remain strong and a solid first quarter is likely to offset the trimmed margins. “Revenue in fact still looks achievable,” said Klaus Rosenfeld, chief executive. “But the bottom line no longer looks achievable.”
From January to March, revenues rose almost 7 per cent to €3.6bn, outpacing the rise in global production volumes for passenger cars. For the year, revenues are still set to rise 4-5 per cent. The timing for the profit warning is particularly bad, coming just four weeks before an “eagerly awaited” investor day that was “supposed to restore faith in the company”, added Mr Schmidt. He projected that analysts would likely cut profit forecasts for the year by 8 per cent to 10 per cent.
(Schaeffler profit warning sparks sector worries)
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1.The news above mentioned with detailed source are from internet.We are trying our best to assure they are accurate ,timely and safe so as to let bearing users and sellers read more related info.However, it doesn't mean we agree with any point of view referred in above contents and we are not responsible for the authenticity. If you want to publish the news,please note the source and you will be legally responsible for the news published.
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