Schaeffler Says It Will Reduce Debt by 1 Billion Euros by 2018Elisabeth Behrmann
Schaeffler AG, the family-owned industrial bearings maker that’s the biggest investor in auto-parts manufacturer Continental AG, said it plans to cut debt by about 250 million euros ($275 million) each year through 2018.
“There’s a clear agreement between the management and stakeholders that until 2018 we’ll reduce debt from free cash flow,” Chief Executive Officer Klaus Rosenfeld said on Thursday at a press conference in Frankfurt.
Schaeffler is burdened with debt from becoming the biggest shareholder in Continental, when its 2008 attempt to acquire a limited holding to pursue industrial cooperation backfired. Net debt was 5.8 billion euros at the end of 2014, Schaeffler said Thursday. The company’s options for reducing its leverage further include selling Continental stock or holding an initial public offering.
The company expects free cash flow will be high enough to cover its debt repayment, Rosenfeld said. Schaeffler hasn’t appointed advisers to help with a share sale and has not made a decision about an IPO, he said.
Schaeffler’s roller-bearings are used in the London Eye Ferris wheel and Airbus SAS’s double-decker A380 airliner. The manufacturer refinanced part of its debt in October and arranged changes to terms governing $7.9 billion of high-yield bonds, which means about 17 percent of its holding in Continental no longer serves as collateral.
Earnings before interest and taxes rose 51 percent last year to 1.5 billion euros, Schaeffler said. Profit in 2013 was held back by a 380 million-euro provision in conjunction with a European Union antitrust probe. Profitability rose to 12.6 percent of sales from 9 percent, meeting the company’s projections of a margin of 12 percent to 13 percent. Schaeffler said this year’s margin will be within the same range.