Schaeffler says higher costs will continue to pressure margins

By Johannes Toft Thyssen and Diana Mandia

(Reuters) -German automotive supplier Schaeffler expects higher wage and energy costs to continue squeezing its business margins this year, it said on Tuesday after missing profit margin targets for 2022.

The company's update sent its shares down 7.2% by 1306 GMT.

Semiconductor shortages have forced global automakers to scrap production plans for millions of cars over the past two years and have helped push up prices, hurting demand.

CEO Klaus Rosenfeld said distortions in the global supply chain had added to costs, as plants in eastern Europe for example had had to switch to Chinese steel from Russian steel due to sanctions on Russia following its invasion of Ukraine. Schaeffler has plants in Hungary and Czech Republic.

"In an environment where you have to constantly put the plants under stress, there are additional costs," he told Reuters.

The Bavarian group, which manufactures high-precision components and systems for powertrain and chassis applications, said bigger wage increases and rising energy costs will impact all divisions this year despite a recovery in its product prices in 2022.

It expects revenue growth of 5% to 8% and an earnings before interest and taxes (EBIT) margin before special items of between 5.5% and 7.5% in the current fiscal year ending Dec. 31.

The group, which will propose a dividend of 0.45 euros per share, reported an EBIT margin before special items of 6.6% in 2022, compared with 8.8% a year earlier and below the 6.8% forecast in a company-compiled consensus.

"The margin is lower than in previous years and not what we are aiming for in the long term. But looking at 2022, it is acceptable," Rosenfeld said.

The group signed an agreement in December to sell its Russian subsidiaries for 10 million euros ($10.67 million), its annual report published on Tuesday stated.

($1 = 0.9376 euros)

(Reporting by Johannes Toft Thyssen and Diana Mandiá in Gdansk, additional reporting Christina Amann in Munich, Editing by Louise Heavens, Bernadette Baum and Susan Fenton)