Schaeffler's revenue (adjusted for currency effects) fell by 21.8% in the first half of the year due to the coronavirus pandemic. However, the Herzogenaurach-based company is cautiously optimistic: clear signs of recovery emerged over the course of the second quarter.

The interim report of the industrial and automotive supplier shows Group turnover of EUR 5.574 billion for the first six months of the year (previous year: EUR 7.226 billion). Adjusted for currency effects, sales fell by 21.8% in this period, in particular as a result of the decline in demand in connection with the Covid-19 pandemic. This was mainly due to the decline in revenue in all three divisions, with the Automotive OEM division recording by far the sharpest currency-adjusted decline of 26.8% in the first half of the year.

Structural and efficiency measures with job cuts

The Schaeffler Group generated EBIT before special items of EUR 65 million in the first six months (prior year: EUR 556 million). This corresponds to an EBIT margin before special items of 1.2 % (prior year: 7.7 %). According to the company, the deterioration compared to the previous year is due in particular to the decline in the gross margin as a result of the volume-related fall in sales.

EBIT in the reporting period was negatively impacted by one-off effects amounting to 288 million euros (previous year: 73 million euros). This included an impairment of goodwill allocated to the Automotive OEM division of EUR 249 million in the first quarter. In addition, the special effects include expenses of EUR 39 million for the expansion of the RACE (Regroup Automotive for higher Margin and Capital Efficiency) and FIT programs, which are primarily related to job cuts.

The RACE (Automotive OEM), GRIP (Automotive Aftermarket) and FIT (Industry) programs initiated in the three divisions in spring 2019 are having the intended effect. The structural and efficiency measures initiated in this context had a positive impact on the cost of sales. In addition, measures were introduced and continued in the reporting period to mitigate the financial effects triggered by the coronavirus pandemic. These include temporary measures such as the introduction and expansion of short-time working, the reduction of vacation days and time accounts, hiring freezes and closing days at our plants. In the first quarter, the program was expanded from 1,300 to 1,900 jobs to be cut.

With these special effects, EBIT amounted to minus 223 million euros (previous year: plus 483 million euros).

Klaus Rosenfeld, CEO of Schaeffler AG: "Thanks to the consistently implemented countermeasures and the solid earnings contribution of our Automotive Aftermarket and Industrial divisions, we have come through the crisis better than expected so far. The recovery in demand in June indicates that things are gradually picking up again after the low point in April. Nevertheless, uncertainty remains high as to when pre-crisis levels will be reached again. For us, this means that we must continue to act in a very disciplined and forward-looking manner."

The Schaeffler Group's freely available funds in the form of cash and credit lines amount to approximately 2.4 billion euros, which corresponds to around 19% of revenue for the last twelve months.

Regions differ

The four regions were affected differently by the pandemic. The Greater China region recorded revenue growth of 3.0% on a currency-adjusted basis in the reporting period due to the recovery that began in the region in the second quarter. The other three regions recorded significant declines in turnover in the first six months. Over the course of June, all divisions and regions saw a noticeable recovery in business performance.

Industrial division: incoming orders stabilize

The Industrial division achieved sales of 1.562 billion euros in the first half of the year (previous year: 1.804 billion euros). Adjusted for currency effects, the decline in sales was 12.8%. During the first six months of 2020, the Europe, Americas and Asia/Pacific regions recorded significantly negative development due to the crisis. Only Greater China recorded double-digit growth, with the wind sector cluster growing in particular. The Power Transmission sector cluster also contributed to growth. Order intake in the Industrial division stabilized towards the middle of the year. In the second quarter, important customer orders were booked for new products, including in the growing robotics sector and for linear technology products. Furthermore, the OPTIME condition monitoring system, which was developed specifically for easy retrofitting in existing industrial plants, was brought to market maturity. The market launch took place in July.

Sales growth in the Greater China region amounted to 17.6% on a currency-adjusted basis, while sales in the Asia/Pacific region declined by 23.4%, Europe by 20.6% and the Americas by 16.8%.

The Industrial division generated EBIT before special items of 141 million euros in the first six months (previous year: 194 million euros), which corresponds to an EBIT margin before special items of 9.0% (previous year: 10.8%).