Investing.com -- Schaeffler AG (ETR:SHA0) warned of a difficult 2025, joining other industry players in offering a downbeat outlook as it sees no recovery in the automotive market next year. The company’s shares fell nearly 2% in Frankfurt trading as of 09:04 GMT.
Europe’s auto sector is grappling with multiple challenges, including high production costs, the transition to electric vehicles (EVs), weakening demand, and growing competition from China.
“Of course, 2025 will continue to be characterized by volatility. Our cautiously optimistic outlook reflects that,” CEO Klaus Rosenfeld said in a statement.
The company anticipates global automobile production will shrink by 0.5% in 2025.
Schaeffler is undergoing a significant restructuring, involving thousands of job cuts and plant closures across Europe, following a sharp decline in its operating margin from 7.3% to 4.5% within a year.
Schaeffler has nearly halved its dividend to 25 euro cents per common share and forecasts an EBIT margin of 3% to 5% for 2025, with the consensus estimates at the higher end of that range. The German auto supplier’s e-mobility division is expected to post an operating (EBIT) margin of -14% to -17% in 2025.
UBS analysts said the company’s 2025 guidance "looks very weak."
At the current price, the Schaeffler shares provide a 5.4% dividend yield for 2025.
The company also forecasts a cash burn of approximately €200 million to a roughly neutral position for the year, with around €350 million set aside for restructuring costs, and expects leverage to increase to about 2.5x.
"We foresee limited potential for leverage improvement heading into 2026, given the increased cash restructuring needs and the current capital allocation policy," JPMorgan (NYSE:JPM) analysts led by Akshat Kacker said in a note.