Adjusting resource allocation ZF Announces Results for the First Half of 2019

“In the near term, we have obtained a large order for passenger hybrid transmissions, and we are also beginning to supply our customers with electric drive products for a mass-produced luxury model, which confirms the company’s strategy and openness. The correctness of the technology. Customers always have long-term confidence in our products and technology,” said ZF CEO Wolf- Henning Scheider. "However, in the face of the current severe economic environment in the world, the global auto market has fallen more than expected, and we cannot be immune."

ZF's business in heavy commercial vehicles and industrial technology remains stable. However, due to the significant reduction in overall vehicle sales in almost all major automotive markets worldwide, particularly in China, ZF's sales growth slowed in the first half of 2019. Prior to this, the Group expects the overall automotive market to rise slightly. In addition to the economic downturn, for example, the uncertainty of the future Brexit and the factors affecting economic policies such as tariffs and trade have adversely affected. Taking into account the impact of exchange rates and mergers and acquisitions, ZF's natural growth rate in the first half of the year was about -1.7%, and sales were about 18.4 billion euros.

ZF AG

ZF's adjusted EBIT for the first half of 2019 was 646 million euros, lower than previously expected. The main factors contributing to the decline in profits are the decline in sales of the passenger vehicle market mentioned above, the further increase in research and development expenditures and the cost of new plants, especially in the field of electric drives and the corresponding project start-up costs. “We are not satisfied with this figure and intend to improve by adjusting our resource allocation. In addition, we have taken additional measures to improve our performance.” ZF Chief Financial Officer Konstantin Sauer Dr. said, "ZF will continue to invest in future-oriented technologies such as electric drives and autonomous driving." On the other hand, the group will postpone or reduce the areas where investment is mature and clearly affected by the economic downturn.

Sauer is confident in the financing that will be needed to acquire WABCO, a manufacturer of commercial vehicle brake systems. “We have already planned for reliable long-term financing, and potential investors are also positive about our plans,” said Sauer. In order to obtain the financing needed for the acquisition, ZF plans to issue a bond loan and a euro bond, and plans to release it on the market at the end of the summer.

ZF 16-speed gearbox

ZF does not expect a significant improvement in the global economic situation in the second half of this year, so the overall performance outlook for 2019 has also been adjusted accordingly. In FY 2019, based on stable market and exchange rate expectations, ZF expects group sales to be between 36 billion and 37 billion euros, and the adjusted full-year EBIT margin will be 4%. Between 5%, free cash flow is between 500 million and 1 billion euros. At the global press conference held in April this year, ZF expects the group's annual sales to be between 37 billion and 38 billion euros, and the adjusted full-year EBIT margin will be 5%. Between 5.5%, after adjusting for mergers and acquisitions and sales, the cash flow target is about 1 billion euros.

Reading volume: Source: Chinese network of truck: Le Feng

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