ZF Reports Successful First Half of 2021 - Technology company meets sales and earnings targets even in difficult environment
- Integration of Wabco on the home stretch
- Growth in commercial vehicle divisions stronger than the market, jointly winning new contracts
- Placement of green bonds and measures to reduce CO2 emissions support sustainability strategy
Friedrichshafen, Germany. ZF concluded the first half of 2021 with positive sales and earnings figures. In contrast to the first half of 2020, which was significantly impacted by the Covid-19 pandemic, the company generated sales of €19.3 billion (2020: €13.5 billion) in the first six months of this year. Year over year, this corresponds to a sales increase of 43 percent. Adjusted EBIT stood at €1.0 billion (2020: minus €177 million). The positive business development contrasts with an overall difficult and volatile international market environment.
“We took the momentum from the second half of 2020 into this year and benefited from the economic recovery of the automotive industry,” said Wolf-Henning Scheider, Chief Executive Officer of ZF, when presenting the half-year figures on Thursday. “At the same time, we have continuously developed our organization in terms of agile cooperation and secured numerous new orders with innovative technologies for lowering emissions and enhancing vehicle safety.”
In addition to continuing work under pandemic conditions, the first half of the year was characterized by immediate effects such as the semiconductor shortage and interrupted supply chains, as well as price increases for raw materials and logistics services. ZF has therefore partially re-adjusted its supply chains and shortened them by increasingly involving local suppliers. “In addition, longer-term trends are accelerating, which is evident in Europe through new highly ambitious CO2 emissions limits,” said Scheider. “While this increases the demand for all-electric drives, it will be very difficult to strike a balance between climate protection, employment, and people’s mobility needs. A clear plan for infrastructure development – from power generation and power grids to the charging infrastructure – is essential in helping determine the path forward.”
ZF has made progress in recent months with the “Tarifvertrag Transformation,” a collective agreement concluded a year ago with the works council and trade unions. In this context, discussions are underway at the German locations to develop objectives for their future orientation. “Here, we are making use of the time the collective agreement gives us until the end of 2022. Together with the employee representatives, we are developing sound plans for the locations. We have already been able to develop promising solutions for most of them,” emphasized Scheider.
Key figures improved; financing strategy adapted
ZF also benefited from the general economic recovery of the automotive industry in the first half of the year. From January through June, the company generated sales of €19.3 billion (2020: €13.5 billion). This is an increase of 43 percent year over year. Adjusted for currency and M&A effects, this corresponds to an organic sales increase of 38 percent (2020: minus 27 percent). The company reported an adjusted EBIT of €1.0 billion. This corresponds to an adjusted EBIT margin of 5.2 percent (2020: minus 1.3 percent).
“In the first half of 2021, we achieved our targets while improving the quality of the results,” said ZF’s CFO Dr. Konstantin Sauer. “In order to continue this positive development, cost containment remains a vital topic for us.”
Given recent developments and the prospects for the next few months, which are characterized by uncertainties due to the current supply chain situation, ZF will stick to its forecast for the overall year. ZF expects to generate sales of between €37 billion and €39 billion this year. From today’s perspective, sales are expected to be at the upper end of the range. The company expects an adjusted EBIT margin in the range of 4.5 to 5.5 percent; the adjusted free cash flow is expected to be between €0.8 billion and €1.2 billion. In the second half of the year, ZF expects a sustained burden due to higher costs for raw materials and logistics services. Risks could emerge from the continued limited availability of semiconductors and the further development of the Covid-19 pandemic.
To achieve the desired balance between investments and the reduction of corporate liabilities, ZF has adapted its financing strategy. One element is the new EMTN program (Euro Medium Term Note) launched in the previous year. “The EMTN program enables us to act faster and more flexibly on the capital market,” explained Sauer. “We have also actively managed the maturity profile of our liabilities.” Amongst other things, ZF has already fully repaid the €1.35-billion credit facility taken during the pandemic as well as the €1.0-billion tranche of the bonded loan used to finance the Wabco acquisition due next year.
Green bond for clean energy and sustainable driveline technology
ZF’s sustainability strategy is also reflected in the finance sector. For the first time, the company issued a green bond in April. The proceeds of €500 million will support the future endeavors of the wind power and electric mobility businesses. The six-year bond with a yield of 2.0 percent, targeted at institutional investors, met with great interest and was six times oversubscribed.
To comply with the provisions of Indian antitrust law, ZF sold its 49-percent share in the Brakes India joint venture in the course of the Wabco acquisition in June. After the shareholding in the Wabco India subsidiary was increased from 75 to 93 percent in 2020 as part of a mandatory takeover bid, the shareholding was reduced to 77 percent in the first half of 2021 (a further two percent will be sold in the second half of the year so that a 75-percent shareholding quota is finally restored). In June, ZF also signed an agreement with Airbus Helicopters on the acquisition of ZF Luftfahrttechnik GmbH in Kassel-Calden, Germany by Airbus Helicopters. The intended sale of this successful aviation technology business opens good prospects for the future development of the business unit.
Combined Commercial Vehicle Division on the Horizon
The two ZF commercial vehicle divisions are keeping their eyes on January 1, 2022. As of next year, they will formally act as a unit, the combined Commercial Vehicle Solutions Division. Today, ZF will present the new Senior Management Team of the new division, which will jointly promote commercial and strategic planning for the upcoming years. The two divisions are already successfully operating in the market, expecting a significant sales increase for 2021. “Soon after the acquisition of Wabco, customers recognized us as a systems supplier for commercial vehicle technology whose product range offers them comprehensive solutions and advantages,” said CEO Scheider. “With the technologies combined in systems, we were able to secure a significant order volume that extends far into the future and encompasses both autonomous driving as well as fleet management and electromobility.”
Prospects for the second half of the year: IAA Mobility and market launch of new technologies
Under the slogan “Next Generation Mobility. Now!” ZF will be showcasing its solutions and ideas for the mobility of tomorrow at the IAA Mobility 2021 in Munich. From September 7 to 12, the company will be present in the trade fair halls of the Bavarian capital (booth A1.B80). The new concept goes far beyond the automobile, covering all segments of individual and public mobility; it offers the perfect platform for showcasing ZF’s broad technology portfolio. At the heart of the presentation are the “software-defined car” and system technologies for long-range electric vehicles, such as those used in the Formula E racing series. However, the components and systems presented by ZF are not dreams of the future. According to the motto of the presentation, they can all already be ordered or about to be launched in the market.
- Technology company meets sales and earnings targets even in difficult environment
- Integration of Wabco on the home stretch
- Growth in commercial vehicle divisions stronger than the market, jointly winning new contracts
- Placement of green bonds and measures to reduce CO2 emissions support sustainability strategy
Friedrichshafen, Germany. ZF concluded the first half of 2021 with positive sales and earnings figures. In contrast to the first half of 2020, which was significantly impacted by the Covid-19 pandemic, the company generated sales of €19.3 billion (2020: €13.5 billion) in the first six months of this year. Year over year, this corresponds to a sales increase of 43 percent. Adjusted EBIT stood at €1.0 billion (2020: minus €177 million). The positive business development contrasts with an overall difficult and volatile international market environment.
“We took the momentum from the second half of 2020 into this year and benefited from the economic recovery of the automotive industry,” said Wolf-Henning Scheider, Chief Executive Officer of ZF, when presenting the half-year figures on Thursday. “At the same time, we have continuously developed our organization in terms of agile cooperation and secured numerous new orders with innovative technologies for lowering emissions and enhancing vehicle safety.”
In addition to continuing work under pandemic conditions, the first half of the year was characterized by immediate effects such as the semiconductor shortage and interrupted supply chains, as well as price increases for raw materials and logistics services. ZF has therefore partially re-adjusted its supply chains and shortened them by increasingly involving local suppliers. “In addition, longer-term trends are accelerating, which is evident in Europe through new highly ambitious CO2 emissions limits,” said Scheider. “While this increases the demand for all-electric drives, it will be very difficult to strike a balance between climate protection, employment, and people’s mobility needs. A clear plan for infrastructure development – from power generation and power grids to the charging infrastructure – is essential in helping determine the path forward.”
ZF has made progress in recent months with the “Tarifvertrag Transformation,” a collective agreement concluded a year ago with the works council and trade unions. In this context, discussions are underway at the German locations to develop objectives for their future orientation. “Here, we are making use of the time the collective agreement gives us until the end of 2022. Together with the employee representatives, we are developing sound plans for the locations. We have already been able to develop promising solutions for most of them,” emphasized Scheider.
Key figures improved; financing strategy adapted
ZF also benefited from the general economic recovery of the automotive industry in the first half of the year. From January through June, the company generated sales of €19.3 billion (2020: €13.5 billion). This is an increase of 43 percent year over year. Adjusted for currency and M&A effects, this corresponds to an organic sales increase of 38 percent (2020: minus 27 percent). The company reported an adjusted EBIT of €1.0 billion. This corresponds to an adjusted EBIT margin of 5.2 percent (2020: minus 1.3 percent).
“In the first half of 2021, we achieved our targets while improving the quality of the results,” said ZF’s CFO Dr. Konstantin Sauer. “In order to continue this positive development, cost containment remains a vital topic for us.”
Given recent developments and the prospects for the next few months, which are characterized by uncertainties due to the current supply chain situation, ZF will stick to its forecast for the overall year. ZF expects to generate sales of between €37 billion and €39 billion this year. From today’s perspective, sales are expected to be at the upper end of the range. The company expects an adjusted EBIT margin in the range of 4.5 to 5.5 percent; the adjusted free cash flow is expected to be between €0.8 billion and €1.2 billion. In the second half of the year, ZF expects a sustained burden due to higher costs for raw materials and logistics services. Risks could emerge from the continued limited availability of semiconductors and the further development of the Covid-19 pandemic.
To achieve the desired balance between investments and the reduction of corporate liabilities, ZF has adapted its financing strategy. One element is the new EMTN program (Euro Medium Term Note) launched in the previous year. “The EMTN program enables us to act faster and more flexibly on the capital market,” explained Sauer. “We have also actively managed the maturity profile of our liabilities.” Amongst other things, ZF has already fully repaid the €1.35-billion credit facility taken during the pandemic as well as the €1.0-billion tranche of the bonded loan used to finance the Wabco acquisition due next year.
Green bond for clean energy and sustainable driveline technology
ZF’s sustainability strategy is also reflected in the finance sector. For the first time, the company issued a green bond in April. The proceeds of €500 million will support the future endeavors of the wind power and electric mobility businesses. The six-year bond with a yield of 2.0 percent, targeted at institutional investors, met with great interest and was six times oversubscribed.
To comply with the provisions of Indian antitrust law, ZF sold its 49-percent share in the Brakes India joint venture in the course of the Wabco acquisition in June. After the shareholding in the Wabco India subsidiary was increased from 75 to 93 percent in 2020 as part of a mandatory takeover bid, the shareholding was reduced to 77 percent in the first half of 2021 (a further two percent will be sold in the second half of the year so that a 75-percent shareholding quota is finally restored). In June, ZF also signed an agreement with Airbus Helicopters on the acquisition of ZF Luftfahrttechnik GmbH in Kassel-Calden, Germany by Airbus Helicopters. The intended sale of this successful aviation technology business opens good prospects for the future development of the business unit.
Combined Commercial Vehicle Division on the Horizon
The two ZF commercial vehicle divisions are keeping their eyes on January 1, 2022. As of next year, they will formally act as a unit, the combined Commercial Vehicle Solutions Division. Today, ZF will present the new Senior Management Team of the new division, which will jointly promote commercial and strategic planning for the upcoming years. The two divisions are already successfully operating in the market, expecting a significant sales increase for 2021. “Soon after the acquisition of Wabco, customers recognized us as a systems supplier for commercial vehicle technology whose product range offers them comprehensive solutions and advantages,” said CEO Scheider. “With the technologies combined in systems, we were able to secure a significant order volume that extends far into the future and encompasses both autonomous driving as well as fleet management and electromobility.”
Prospects for the second half of the year: IAA Mobility and market launch of new technologies
Under the slogan “Next Generation Mobility. Now!” ZF will be showcasing its solutions and ideas for the mobility of tomorrow at the IAA Mobility 2021 in Munich. From September 7 to 12, the company will be present in the trade fair halls of the Bavarian capital (booth A1.B80). The new concept goes far beyond the automobile, covering all segments of individual and public mobility; it offers the perfect platform for showcasing ZF’s broad technology portfolio. At the heart of the presentation are the “software-defined car” and system technologies for long-range electric vehicles, such as those used in the Formula E racing series. However, the components and systems presented by ZF are not dreams of the future. According to the motto of the presentation, they can all already be ordered or about to be launched in the market.
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