Bosch Sees Higher 2014 Profit as Europe Economy Rebounds

Robert Bosch GmbH, the world’s biggest car-parts maker, forecast that profit margins will widen in 2014 as Europe’s economy recovers and extra costs from the solar-energy division it’s eliminating all but disappear.

Adjusted for 1.3 billion euros ($1.8 billion) in charges related to exiting the unprofitable solar business, earnings before interest and taxes rose to about 6 percent of sales in 2013 from about 5 percent a year earlier, the Stuttgart, Germany-based company said. Sizable charges aren’t expected this year, company officials said at a press briefing.

“We want to make a further step toward our profitability goal” of an Ebit margin of 8 percent, Chief Executive Officer Volkmar Denner said at the briefing late yesterday in Stuttgart. Bosch plans to complete the withdrawal from the solar industry in the “coming weeks and months.”

Bosch, which also makes packaging equipment, water heaters and power tools, anticipates the economy in the European Union will grow 0.7 percent this year, the region’s first expansion since 2011. The closely held company, which generates more than half of revenue from auto parts, has sidestepped the European slowdown by expanding in Asia and North America.

Weakness in Europe’s industrywide car sales, which slumped for a sixth straight year in 2013, and the euro’s gains on currency markets held back sales growth at Bosch last year. According to preliminary figures, revenue rose 2.7 percent to 46.4 billion euros, with foreign-exchange fluctuations causing a 1.5 billion-euro burden, the company said. In April, Bosch forecast an increase of as much as 4 percent.

Carmaking Growth

Bosch expects higher sales this year, boosted by a 3 percent increase in global auto production. Currency moves aren’t expected to be a “significant” burden this year, Chief Financial Officer Stefan Asenkerschbaumer said at the briefing.

The German manufacturer agreed to sell the main factory of its unprofitable solar operations to Solarworld AG (SWV) in November after deciding to exit the business in March 2013. The unit has accumulated 3.7 billion euros in losses because of increased competition from China. Bosch is sticking to a plan to complete the deal with Solarworld in the coming weeks, the CEO said.

The German manufacturer is still looking for a buyer for a factory in France and its 91 percent stake in Aleo Solar AG (AS1), Denner said. Bosch agreed in November to continue funding Aleo through March as it searches for a purchaser. The unit lost 38 million euros before interest and taxes in the first nine months of 2013 as weaker demand in Europe caused sales to tumble 56 percent.

Including the charges from the solar operations, the Ebit margin last year was 3 percent of sales.

“We are pursuing our financial targets rigorously” and are “on track” to meet margin goals, Denner said.

To contact the reporter on this story: Chris Reiter in Berlin at creiter2@bloomberg.net

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

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