September 19, 2018 / 9:41 AM / a month ago

Germany's Schaeffler sticks to sales target despite weaker car industry demand

FRANKFURT (Reuters) - Schaeffler AG (SHA_p.DE) revised down its forecast for automotive revenues due to weaker demand in Greater China and Europe, but kept its guidance for overall sales this year thanks to stronger orders at its industrial division.

The update from the German ball-bearings specialist sent its preferred shares 3.4 percent higher in Frankfurt, also lifting shares in Swedish competitor SKF (SKFb.ST) by 2.8 percent.

Growing global trade frictions are having an increasing impact on industrial supply chains, forcing a string of suppliers and manufacturers to cut their revenue and profit forecasts in recent weeks.

“We are operating in a challenging environment in the automotive business,” Schaeffler CEO Klaus Rosenfeld said in a statement.

Family-owned Schaeffler nevertheless stood by its guidance for revenue growth of 5 to 6 percent this year, at constant currency, a pre-tax profit margin of 10.5 to 11.5 percent and free cash flows before inflows and outflows for M&A activities of around 450 million euros ($527 million).

But, in a statement issued ahead of a capital markets day on Thursday, the company cut its forecast for revenue growth at its Automotive OEM division to 4.5 to 5.5 percent at constant currency from 6 to 7 percent previously.

Schaeffler saw growth at its industrial division at 8 to 9 percent, up from 6 to 7 percent previously, and said EBIT margins would expand by a percentage point to 10 to 11 percent.

The tweaked forecasts come against a backdrop of profit warnings from Europe’s automotive sector, including a downgrade from Germany’s Continental (CONG.DE) due to weak revenues and higher costs for developing hybrid and electric vehicles.

Luxury carmaker Daimler (DAIGn.DE) blamed rising U.S.-China trade tariffs for denting its second-quarter profits by 30 percent. It earlier cut its full-year guidance.

Separately, privately held German industrial supplier Bosch [ROBG.UL] forecast 4 percent growth at its core auto parts unit this year, double the pace of global car production.

Bosch cited an expected increase of 7 to 8 percent in sales to truck and offroad vehicle manufacturers as a driver for growth at its Mobility Solutions division, which accounts for 60 percent of total revenues.

Reporting by Douglas Busvine; Editing by Adrian Croft

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