Release Date: November 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Schaeffler AG (SCFLF, Financial) reported strong free cash flow of EUR 188 million in Q3, demonstrating robust cash generation capabilities.
- The company successfully completed the merger with Vitesco, aligning with strategic goals and enhancing its position in the e-mobility sector.
- Vehicle Lifetime Solutions (VLS) division showed continued strong sales growth and maintained a record EBIT margin, outperforming competitors.
- Schaeffler AG (SCFLF) confirmed its guidance for 2024, maintaining a dividend payout ratio of 40% to 60%, reflecting confidence in financial stability.
- The company announced 'Program Forward,' targeting a recurring EBIT impact of EUR 290 million per annum by 2029, indicating proactive measures to address market challenges.
Negative Points
- Q3 sales were slightly below the previous year, with declines in bearings and industrial solutions due to market-driven factors.
- The automotive technologies division reported a disappointing 2.3% margin, impacted by reduced volumes and e-mobility ramp-ups.
- The market environment remains challenging, particularly in Europe, with lower automotive production and ongoing industrial sector weaknesses.
- Schaeffler AG (SCFLF) faces headwinds in bearings and industrial solutions, necessitating self-help measures to address underperformance.
- The integration of Vitesco involves significant restructuring costs, with EUR 580 million expected, impacting short-term financials.
Q & A Highlights
Q: What are Schaeffler's capital allocation priorities, and how do they impact the leverage ratio and dividend payout for 2025?
A: Klaus Rosenfeld, CEO, stated that the strategic logic for capital allocation remains unchanged, focusing on reinvestment in e-mobility and growth businesses. The leverage ratio target is to operate between 1.25 to 1.75 times EBITDA. The dividend policy aims to maintain a continuous payout without borrowing, though the exact payout ratio for 2025 is yet to be determined.
Q: Can you elaborate on the negative operating leverage in the automotive technology segment, specifically in powertrain and chassis?
A: Claus Bauer, CFO, explained that the high vertical integration in powertrain and chassis results in significant operating leverage. The weak volumes in Q3, particularly in July and August, impacted margins by about 1.5 percentage points. Future volume increases and adjustments from the Program Forward are expected to improve this.
Q: Is it possible to quantify the losses anticipated within Schaeffler's e-mobility business for 2024 and improvements expected in 2025?
A: Klaus Rosenfeld stated that Schaeffler will not separate the financials of Schaeffler and Vitesco post-acquisition. The combined e-mobility business will follow Schaeffler's conservative accounting logic, which does not capitalize R&D costs, impacting initial profitability.
Q: How does the current trading environment compare to Q3, and what is the outlook for Q4?
A: Claus Bauer noted that September showed strong performance, continuing into October and expected to persist into November. However, Q4 is traditionally challenging due to seasonal factors, particularly in Europe.
Q: Regarding the Program Forward, what is the expected split between direct and indirect cost savings across divisions?
A: Klaus Rosenfeld indicated that in Bearings and Industrial Solutions, the majority of savings are related to capacity and location consolidation. In synergies, savings are mostly indirect costs, while transformation impacts both direct operations and administration.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
