Annual Report 2013
Senior Vice President Communications, Marketing and Investor Relations
Tel. +49 9132 82-5000
Fax +49 9132 82-4444
2014-03-20 | 000-004-913 DE-EN
SCHAEFFLER AG, HERZOGENAURACH
International automotive and industrial supplier Schaeffler has successfully continued its growth strategy in 2013. The company generated growth of 2.9 percent at constant currency. Its Automotive division grew by 8.6 percent at constant currency, while Industrial division revenue, which makes up approximately 27 percent of the Schaeffler Group’s total revenue, declined by 8.1 percent at constant currency. “Our two divisions, Automotive and Industrial, experienced very different trends in 2013. While our Automotive business grew considerably faster than the market, Industrial division revenue was below the prior year level due to market factors,” said Klaus Rosenfeld, CEO of Schaeffler AG. Including the adverse impact of currency translation, the Schaeffler Group’s revenue for 2013 grew by €11.2 billion, a 0.7 percent increase.
Earnings quality maintained – strong free cash flow
Adjusted for special items, earnings before financial result, share of net income of equity-accounted investees, and income taxes (EBIT) of €1,410 million were in line with prior year. Schaeffler’s adjusted EBIT margin of 12.6 percent remained high (prior year: 12.7 percent). Special items consist of personnel-related structural measures of €48 million and the provision for the EU antitrust proceedings of €380 million. Including special items, EBIT amounted to €982 million (prior year: €1,413 million) and the EBIT margin was 8.8 percent.
Net income after non-controlling interests was €865 million (prior year: €870 million). The amount includes Schaeffler’s €801 million (prior year: €554 million) share of net income of Continental AG, including a €187 million gain on the disposal of a 1.95 percent interest in Continental AG held by Schaeffler Group in the third quarter of 2013.
Free cash flow amounted to €629 million, an improvement of €248 million over the prior year (prior year: €381 million), and includes a dividend of €162 million related to the investment in Continental AG. Capital expenditures on property, plant and equipment and intangible assets were €572 million or approximately 5 percent of revenue as planned.
Schaeffler Group has taken additional measures to optimize its capital structure in 2013. These measures have further lowered Schaeffler’s borrowing cost. The company also prepaid €1.1 billion of its financial debt, reducing it to €6.3 billion using excess free cash flow and the proceeds of the sale of an approximately 2 percent interest in Continental AG. As a result, net financial debt (financial debt less cash and cash equivalents) decreased to approximately €5.9 billion (prior year: €6.8 billion). The decrease brought the company’s debt to EBITDA ratio, defined as the ratio of net financial debt to adjusted EBITDA, down to 2.6 at December 31, 2013 (prior year: 3.2).
The Group’s headcount increased by 2,460 employees or 3.2 percent to 78,559 at December 31, 2013. Schaeffler recruited new personnel primarily in production and production-related areas – mainly in the regions Asia/Pacific, North America, and Europe, primarily in Central Europe.
Organizational and leadership structure realigned – “One Schaeffler” program established
In order to better utilize its growth potential, Schaeffler Group has realigned its organizational and leadership structure. The target operating model developed in 2013 is based on a consistent matrix organization with three dimensions: divisions, functions, and regions. Schaeffler Group has redrawn its regions effective January 1, 2014: In light of its growing global economic importance, Greater China was designated a separate region, while Korea, Japan and the countries in Southeast Asia were combined to form the new region “Asia/Pacific”. India has become part of the newly created region “Europe”, which includes not only Germany, but also the EU-countries, the Middle East, Africa, and Russia. In addition, the former regions North and South America have been combined into one region “Americas”. The regions will be headed up by regional CEOs who are part of Schaeffer Group’s extended executive board. Thus, the composition of the extended executive board reflects all three of the matrix organization’s dimensions.
In addition, the company started the “One Schaeffler” program in November 2013, which – based on the continuous improvement process that has been in place for years – comprises the 20 most important improvement initiatives of the Schaeffler Group worldwide. One of the key common objectives of the initiatives is to harmonize the structures and processes within the company and to integrate them to a greater extent than has been the case in the past in order to utilize internal synergies and make the company more efficient.
Schaeffler is shaping “Mobility for tomorrow”
Schaeffler Group also honed the strategic focus of its growth strategy in 2013. Based on the megatrends and changing market conditions driving the Group’s business, Schaeffler is focusing on the themes “environmentally friendly drives”, “urban and interurban mobility”, and “energy chain”. Prof. Dr Peter Gutzmer, Chief Technology Officer of Schaeffler Group, commented: “We are a development partner with comprehensive systems expertise for the drive train, both for vehicles with internal combustion engines and for hybrid and electric mobility solutions. Our strength lies in applying our automotive expertise to other urban and interurban forms of mobility such as railway and aerospace and also to means of generating energy such as wind, solar, and water power. Thus, we offer solutions for the entire value chain from energy generation and innovative mobility concepts through to aftermarket services.”
Schaeffler Group spent €611 million (prior year: €593 million) or again approximately 5 percent of consolidated revenue on research and development in 2013 in order to further strengthen its foundation for promising innovations and a long-term competitive position. “As an innovative and technological leader we actively participate in shaping these focus areas with our own research and development and provide our customers and business partners with an attractive product and service offering,” said Prof. Dr Peter Gutzmer. Schaeffler Group’s strong innovative ability is illustrated, among other things, by the increase in the number of patent applications compared to the prior year. With its 2,100 patent applications, Schaeffler ranked second among Germany’s most innovative companies in the official patent statistics of the German Patent and Trademark Office (“Deutsches Patent- und Markenamt” – DPMA).
Ambitious targets for 2014
The company is optimistic about 2014. “We will continue to consistently pursue our growth strategy this year. Based on the strict focus of our business on the global growth markets, the excellent position in our business sectors, and the large number of new product start-ups, particularly in the Automotive division, we expect our revenue to grow by 5 to 7 percent at constant currency in 2014,” Klaus Rosenfeld said. For its Automotive division, the company again anticipates revenue growth significantly exceeding the increase in worldwide production of passenger vehicles and light commercial vehicles. The positive trend in order intake in the Industrial division during the fourth quarter of 2013 indicates moderate revenue growth in 2014. Due to the expected improvement in Industrial division earnings and the continued stable earnings situation of the Automotive division, the company anticipates generating an EBIT margin of 12 to 13 percent in 2014.
Forward-looking statements and projections
Certain statements in this press release are forward-looking statements. By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. These risks, uncertainties and assumptions could adversely affect the outcome and financial consequences of the plans and events described herein. No one undertakes any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. You should not place any undue reliance on forward-looking statements which speak only as of the date of this press release. Statements contained in this press release regarding past trends or events should not be taken as representation that such trends or events will continue in the future. The cautionary statements set out above should be considered in connection with any subsequent written or oral forward-looking statements that Schaeffler, or persons acting on its behalf, may issue.
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