Press Release

2017-Mar-30

ZF in 2016: Increased Profits, Reduced Debt

  • Group sales rose to €35.2 billion
  • €2 billion adjusted free cash flow
  • Debt from the TRW acquisition reduced by €1.6 billion
  • Research spending raised to €2 billion

Friedrichshafen. ZF Friedrichshafen AG closed the 2016 fiscal year with a significant rise in profits and a strong improvement in cash flow. Group sales rose by 20.6 percent to €35.2 billion. The adjusted EBIT margin climbed one percentage point to 6.4 percent and adjusted free cash flow totaled €2 billion. From this strong financial position, ZF reduced its debt from the TRW acquisition by €1.6 billion while increasing spending on research and development to €2 billion. In 2017, the company is targeting sales of approximately €36 billion and an adjusted EBIT margin of more than 6 percent.

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ZF in 2016: Increased Profits, Reduced Debt

“ZF demonstrated its strength in 2016 with outstanding business figures and innovative products,” said CEO Dr. Stefan Sommer, describing the fiscal year just ended. “This strength gives us a solid foundation to help shape the challenging transformation in the automotive industry through digitalization, electromobility and autonomous driving.”

Following the TRW acquisition in mid-May 2015, sales from the resulting new Active & Passive Safety Technology Division were included for the first time in the ZF Group Sales in 2016. This helped reported sales to rise by 20.6 percent to €35.2 billion. Compared to the pro-forma figures of the previous year, including the TRW sales for all of 2015, sales rose by 2.2 percent. Organic growth without exchange rate effects as well as buying and selling activities was 4.2 percent.

ZF’s automotive sales increased moderately in 2016, especially for automatic passenger car transmissions and safety technology. Sales posted by the Industrial Technology Division rose 16.7 percent compared to 2015. This was due in particular to the acquisition of the wind turbine gearbox and industrial drives segments from Bosch-Rexroth as well as significantly higher sales in the Wind Power Business Unit. As a result the share of Industrial Technology in total Group sales rose to eight percent. That is consistent with the objectives of the ZF 2025 Strategy for greater diversification of ZF business activities.

Considerable improvement in earnings

ZF was able to considerably improve its earnings in 2016. Earnings before interest and taxes (EBIT) adjusted for extraordinary items climbed from just under €1.6 billion to €2.2 billion. This corresponds to an adjusted EBIT margin of 6.4 percent, which equals an increase of around 20 percent. The main reasons for this were better operating performance and synergies leveraged by integrating TRW. The adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) grew from €2.9 billion to over €3.8 billion, which corresponds to an adjusted EBITDA margin of 10.8 percent. ZF thus exceeded its earnings targets for 2016.

Adjusted free cash flow amounted to €2 billion. There was a positive effect from the increased cash flow from operating activities, especially in the form of improved operating performance, synergies from the TRW integration and targeted investment. ZF was able to reduce its debt load by roughly €1.6 billion in fiscal year 2016. Further debt reduction remains a central company target for 2017.

“Our sound income and financial power in 2016 as well as our strong free cash flow of more than €2 billion allowed us to quickly reduce the debt from the TRW acquisition and simultaneously invest in future technologies,” was how ZF's Chief Financial Officer Dr. Konstantin Sauer characterized the current financial position of the ZF Group.

Number of employees stable

As of December 31, 2016, ZF had a global workforce of 136,820 (2015: 138,269). The slight decline compared to 2015 is primarily due to the sale of the Engineered Fasteners & Components Business Unit concluded in July 2016. This business unit had roughly 2,800 employees. In addition, the Cherry Group with roughly 400 employees was sold to the German private investment company GENUI in October 2016.

At the same time, ZF created around 1,800 new jobs last year and ranks among the leading German companies to provide exten¬sive training and apprenticeship opportunities. At the end of 2016, ZF’s workforce counted more than 2,800 apprentices and students in the work-study degree program, respectively (2015: 2,300).

Investments in the future

14,550 employees work for ZF Research and Development worldwide. In 2016, ZF invested €2 billion in research and development, which accounts for 5.5 percent of sales (2015: 4.8 percent). This increase compared to the previous year resulted primarily from intensified development activities in the Active & Passive Safety Technology and E-Mobility Divisions.

“ZF is grasping the opportunity of transforming itself into a leading technology company in e-mobility and autonomous driving,” says CEO Dr. Stefan Sommer. ZF is counting on its combined strengths in mechanical and electronic systems. “The car of the future will still rely on mechanical components. Even an ‘iPhone on wheels’ needs brakes, a steering system, axles and the rest,” says Dr. Stefan Sommer. “Our strength is our combination of hardware and software. So we produce intelligent mechanical systems.”

2017 Forecast

For the current fiscal year, ZF expects Group sales of roughly €36 billion, an adjusted EBIT margin of more than 6 percent as well as an adjusted EBITDA margin of over 10 percent. With an adjusted free cash flow of significantly more than €1 billion, ZF will continue to reduce its debt and invest in the future. “Starting from this position of strength and financial stability, we can afford to invest heavily in future-oriented technology. This will help secure jobs for our employees over the long term,” says Sommer.

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CONTACT

Andreas Veil

Head of Commercial and Financial Communication

+49 7541 77-7925

andreas.veil@zf.com

Christoph Horn

Head of Corporate Communications

+49 7541 77-2705

christoph.horn@zf.com