Schaeffler (SHA0) Q2 2024 earnings summary

Executive summary

• Q2 2024 sales increased by 4.2% year-over-year to €4,191 mn, led by strong Vehicle Lifetime Solutions (VLS) and Automotive Technologies, while Bearings & Industrial Solutions (BIS/B&IS) declined due to market headwinds and operational one-offs.

• EBIT margin before special items fell to 4.9% in Q2 (from 7.1% in Q2 2023), mainly due to lower profitability in BIS/B&IS and higher integration costs.

• Free cash flow before M&A was €75m in Q2, down from €103m prior year, impacted by Vitesco integration and financing costs.

• Updated FY 2024 guidance: sales growth unchanged, but EBIT margin and free cash flow targets lowered due to weaker BIS/B&IS and Vitesco integration costs.

• Vitesco integration preparations are on track for October 1, with full consolidation expected in Q4 2024.

Financial highlights

• Q2 2024 group sales: €4,191 mn (+4.2% FX-adjusted year-over-year); H1 2024: €8,276 mn (+0.8% reported, +2.0% constant currency).

• Gross margin Q2: 21.0% (down 0.4pp year-over-year); EBIT before special items: €204 mn (down €85 mn year-over-year).

• Net income Q2: €33 mn (down €105 mn year-over-year); EPS Q2: €0.05; H1 2024 EPS: €0.40.

• Free cash flow before M&A Q2: €75 mn; H1: €-91m, leverage ratio increased to 2.4x LTM EBITDA due to Vitesco financing.

• Capex H1: €383m; capex ratio Q2: 4.7%.

Outlook and guidance

• FY 2024 sales growth guidance: 5–8% FX-adjusted (previously 6–9%); EBIT margin before special items: 5–8% (previously 6–9%); free cash flow before M&A: €200–300 mn (previously €300–400 mn).

• Guidance reflects Vitesco at equity until Q3, full consolidation in Q4, and ongoing BIS/B&IS weakness.

• Second half of 2024 expected to remain challenging, especially for BIS/B&IS and industrial sectors.

• VLS expected to maintain strong sales, but growth rates will normalize against tougher comparables.

• No strong recovery anticipated in industrial business in H2; performance management and cost measures underway.