In the first half of 2018, Germany-based component manufacturer and advanced-technology provider ZF Friedrichshafen AGhas reported it has “achieved its targets” for the first half of 2018. Namely, that its sales rose to 18.7 billion euros ($21.9 billion) and its adjusted operating profit (EBIT) amounted to approximately 1.1 billion euros ($1.3 billion).

At the same time, ZF said it was able to further reduce the debts incurred from its acquisition of TRW and to “significantly increase investments in property, plant, and equipment as well as expenditure in research and development.”

"The strong organic sales growth of around 8% shows that we are offering the right products for the global markets," said ZF CEO Wolf-Henning Scheider. "We achieved significant growth in China and the U.S.A in particular, where we grew faster than the industry average, especially in the passenger car segment."

The company also stated, however, that sales development was “held back by the appreciation of the euro, particularly against the U.S. dollar and other currencies.” Total ZF Group sales included pro-rated sales for the first four months from the Global Body Control Systems Business Unit, which ZF sold in spring 2018. Taking into account exchange rate effects and the sale of the Global Body Control Systems Business Unit, the increase in sales reported on the balance sheet amounted to approximately 2%.

ZF said it was able to further reduce its gross financial debt by approximately 450 million euros. At the same time, the company “increased its investments in the future” by spending 1.1 billion euros on research and development, with a focus on the technologies of autonomous driving, electromobility, and active and passive safety technology. In addition, ZF invested 500 million euros in property, plant, and equipment improvements.

"Despite further significant debt reduction and enormous investments in the future, we ended up within range of our issued profit target of around 6%," said ZF CFO Konstantin Sauer. "Our main focus in the second half of 2018 will be on earnings quality."

ZF said it is “cautiously optimistic” about the second. The company stated that the “predicted weakening demand for passenger cars in the North American and Asia-Pacific markets can presumably be compensated for by significant growth rates in the commercial vehicle sector. In Europe, the automotive industry continues to develop in a positive direction, with opportunities and challenges arising from technology shifts. South America is now growing strongly – starting from a low level, however.”

"Even if conditions become somewhat rougher in the second half of the year – especially due to impairments of free trade – we are sticking to our forecast," added Sauer.

For the overall year of 2018, ZF said it expects consolidated sales of approximately 36.5 billion euros with its EBIT margin expected to be 6% and with its free cash flow anticipated to exceed 1 billion euros.

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