ZF records H1 adjusted operating profit down to EUR1.1bn

ZF has posted first-half adjusted operating profit down from EUR1.2bn (US$1.4bn) to EUR1.1bn, while sales rose to EUR18.7bn.

The German supplier also reduced debts incurred from the TRW acquisition and significantly increased investments in property, plant and equipment as well as expenditure in research and development.

"The strong organic sales growth of around 8% shows we are offering the right products for the global markets," said ZF CEO, Wolf-Henning Scheider.

"We achieved significant growth in China and the US in particular, where we grew faster than the industry average, especially in the passenger car segment."

However, sales development was held back by the appreciation of the euro, particularly against the US dollar and other currencies. Total Group sales included pro-rated sales for the first four months from the Global Body Control Systems Business Unit, which ZF sold in spring, 2018.

Taking into account exchange rate effects and the sale of the Global Body Control Systems Business Unit, the increase in sales reported on the balance sheet amounted to around 2%.

ZF was able to further reduce its gross financial debt by around EUR450m. At the same time, the technology company increased its investments in the future: ZF spent EUR1.1bn on research and development, with a focus on autonomous driving, electromobility, and active and passive safety technology.

The company also invested EUR500m in property, plant and equipment.

"Despite further significant debt reduction and enormous investments in the future, we ended up within range of our issued profit target of around 6%," added ZF CFO, Konstantin Sauer.

"Our main focus in the second half of 2018 will be on earnings quality."

ZF noted it was "cautiously optimistic" about the second half of the year. The predicted weakening demand for passenger cars in the North American and Asia-Pacific markets might be compensated for by significant growth rates in the commercial vehicle sector.

In Europe, the automotive industry continues to develop in a positive direction, notes the supplier, with "opportunities and challenges arising from technology shifts." South America is now growing strongly – starting from a low level however.

"Even if conditions become somewhat rougher in the second half of the year – especially due to impairments of free trade – we are sticking to our forecast," added CFO Sauer.

For 2018, ZF expects consolidated sales of around EUR36.5bn; the EBIT margin is expected to be 6% and free cash flow is anticipated to exceed EUR1bn.

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