By Amir Orusov (Reuters) -German machine and car parts maker Schaeffler reported lower-than-expected operating profit for the second quarter on Wednesday, citing weaker demand in Europe and China,
Schaeffler Falls Short of Q2 Profit Expectations Amid Weak Demand
By Amir Orusov
(Reuters) -German machine and car parts maker Schaeffler reported lower-than-expected operating profit for the second quarter on Wednesday, citing weaker demand in Europe and China, adverse currency effects and U.S. tariffs.
Shares in the company fell by 5%.
Schaeffler said its adjusted earnings before interest and taxes fell 15.8% to 205 million euros ($237.3 million) in the quarter, missing analysts' forecast of 227 million euros in a company-compiled consensus. The corresponding margin of 3.5% also fell slightly short of the 3.8% average estimate.
Schaeffler said its quarterly sales declined in Europe by 5% due to a weak market.
While sales in Greater China region fell by 6.7%, CEO Klaus Rosenfeld told Reuters the decline was a "temporary effect as one major program is winding down, while the new ones haven’t fully ramped up yet."
Despite the challenges, "the first weeks of the summer months suggest that we are on track to achieve full-year guidance," Rosenfeld said.
Commenting on the impact of U.S. tariffs' effect on the company, Rosenfeld said "the impact is manageable", adding it would amount to a low double-digit million euros figure.
He added that the second-quarter impact was more pronounced than expected for the full year, as compensatory pricing measures would take effect later.
To offset the tariff burden, the company has been raising its prices to achieve compensation, while keeping customer relationships in mind, he said.
The company is also preparing to expand in the defense sector. "We have exactly the right competency set, including systems understanding, superior engineering and development capabilities, that is needed in a complex supply chain to help big defense OEMs to build their business," Rosenfeld said.
German auto and car parts makers are exploring the defence sector as a potential growth avenue as Europe ramps up military spending.
($1 = 0.8639 euros)
(Reporting by Amir Orusov in Gdansk; editing by Milla Nissi-Prussak and Matt Scuffham)
