Overall assessment of the 2017 business year
The Board of Managing Directors considers 2017 a satisfactory year overall. In a highly dynamic market and competitive environment, which is profoundly changing the Automotive as well as the Industrial business, the Schaeffler Group generated revenue growth of 5.9% excluding the impact of currency translation in 2017, exceeding its guidance for the year of 4 to 5% (at constant currency). The positive growth trend in the latter half of the year was particularly encouraging. Both of the company’s divisions contributed to this encouraging performance. While Automotive division revenue increased by 5.9% excluding the impact of currency translation in 2017, thus once again outperforming global automobile production, the Industrial division grew its revenue by 5.7%. In the fourth quarter of 2017, the Industrial division expanded by 9.0% excluding the impact of currency translation. These figures demonstrate that the Industrial division has returned to a long-term growth path.
However, the company’s original expectations for the EBIT margin before special items and free cash flow were not met. On June 26, 2017, the Board of Managing Directors of Schaeffler AG decided to reduce its guidance for the EBIT margin before special items from previously 12 to 13% to 11 to 12% due to a substantially lower earnings development in the Automotive division in the second quarter 2017 compared to the prior year. At the same time,
the guidance for free cash flow was reduced from previously approx. EUR 600 m to approx. EUR 500 m. The Schaeffler Group met the amended earnings guidance by generating an EBIT margin before special items of 11.3%. While the Automotive division’s EBIT margin before special items declined to 12.2% this year, due to lower earnings in the Automotive division compared to the prior year, the Industrial division reported an increase in its EBIT margin before special items to 8.1%. The measures taken under the program “CORE” to improve efficiency and reduce costs are beginning to prove effective for the long-term.
The Schaeffler Group generated free cash flow of EUR 488 m, achieving the amended guidance of approx. EUR 500 m. The strategic indicator Schaeffler Value Added before special items (SVA), which serves as an indicator of the amount of shareholder value added during the year, amounted to EUR 787 m in 2017 (prior year: EUR 939 m), representing a return on capital employed (ROCE) before special items of 19.9% (prior year: 22.3%).
The company continued to execute its strategy “Mobility for tomorrow” in 2017. Its “Agenda 4 plus One” excellence program and its 20 initiatives have laid the foundation to make the Schaeffler Group even more future-proof. Like any transformation program, the “Agenda 4 plus One” will initially result in one time charges and investments that will impact the company’s earnings, including in 2018. The company has decided to accelerate the implementation of the program in 2018. The Schaeffler Group adheres to its Financial Ambitions for 2020. With the strategy “Mobility for tomorrow”, the Board of Managing Directors views key fundamentals for long-term growth and adding value to be in place.