Schaeffler Says North America, Asia to Push Sales Growth

Schaeffler AG, the industrial- bearing maker that’s the biggest investor in car-parts producer Continental AG (CON), said demand in North America and Asia will more than make up for a drop in Europe to allow sales growth in 2013.

Revenue this year will rise by about 4 percent, while global auto production will increase about 2 percent, Chief Executive Officer Juergen Geissinger said today at a press conference at the company’s headquarters in Herzogenaurach, Germany. The margin of earnings before interest and taxes will amount to about 13 percent of sales.

“We will continue to grow faster than our core markets,” Geissinger said. Even with a decline in the Ebit margin last year, Schaeffler’s “profitability is still uniquely high for our sector.”

Europe’s car-sales contraction accelerated in February, with a 10 percent drop to 829,359 vehicles, as a steepening decline in Germany, the region’s biggest market, hurt previously resilient Volkswagen AG (VOW), Bayerische Motoren Werke AG and Daimler AG. (DAI) The three German carmakers are key customers for both Schaeffler and Continental, Europe’s second-largest auto-parts supplier and its No. 2 tiremaker.

Industry Forecasts

U.S. auto sales may rise 4.1 percent this year to 15.1 million vehicles, according to the average estimate of 18 analysts surveyed by Bloomberg in January. That contrasts with predictions of a drop of as much as 5 percent in Europe’s car market by industry executives in the region. The state-backed China Association of Automobile Manufacturers is forecasting passenger-car sales this year will rise 8.5 percent to 16.8 million vehicles.

The two component manufacturers are involved in more than 30 joint industrial projects, including turbo chargers and an electronic parking brake, and have teamed up in purchasing. Cooperation stems from Schaeffler’s failed effort more than four years ago to combine with Hanover, Germany-based Continental.

Geissinger said he is “very satisfied” with the cooperation efforts and projects are “on a really good way.”

Closely held Schaeffler, whose roller-bearings are used in the London Eye Ferris wheel and Airbus SAS (EAD)’s double-decker A380 airliner, now owns 49.9 percent of Continental after gradually reducing the holding from more than 90 percent. The most recent disposal was a 10 percent stake sold in September that raised the amount of freely traded stock, supporting Continental’s return to Germany’s benchmark DAX Index (DAX) after a 45-month absence.

2008 Bid

Schaeffler offered to buy Continental in July 2008, two months before the collapse of Lehman Brothers Holdings Co. The manufacturer’s plan only to seek a 49.99 percent stake backfired when more investors than it expected accepted the bid as markets tanked in the global credit crunch. Following the bid and Continental’s earlier purchase of Siemens AG (SIE)’s VDO parts division, combined debt totaled 22 billion euros.

Net debt at Schaeffler narrowed to 6.8 billion euros at the end of 2012 from 7.1 billion euros a year earlier, Schaeffler said today. The company will work to reduce financing costs further in 2013, Chief Financial Officer Klaus Rosenfeld said at the news conference.

Asked about plans to open Schaeffler for other investors outside the owner family, Rosenfeld said the company “will comment on this once we’re ready” and a decision on the future strategy has been made.

Continental said on March 7 that net debt was reduced almost 22 percent to 5.3 billion euros in 2012.

Earnings Decline

Schaeffler’s revenue last year increased 4 percent to 11.1 billion euros, led by 7.1 percent growth at the automotive division. Ebit fell 16 percent to 1.41 billion euros, amounting to 12.7 percent of sales, narrower than the 15.8 percent posted in 2011.

“The Ebit margin decreased last year mainly because of the market weakness in Europe and slowing growth in emerging markets,” Geissinger said.

The company was initially targeting a sales increase of more than 5 percent to about 11.2 billion euros for 2012, with the Ebit margin exceeding 13 percent. Schaeffler cut its forecast in the second half of the year as the European car market deteriorated.

The manufacturer is building plants or expanding existing factories at 17 sites worldwide in the two years through 2014, with Asia and eastern Europe accounting for the majority of the push, Geissinger said.

To contact the reporter on this story: Christoph Rauwald in Herzogenaurach at crauwald@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net

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