The strong growth of the Industrial division, whose sales increased by 10.4% on a currency-adjusted basis, should be highlighted. Regionally, the Greater China region again made the largest contribution with an increase of 18.1 percent (at constant currency). On this basis, the Schaeffler Group generated earnings before financial result and income taxes (EBIT) of EUR 391 million for the first three months (prior year: EUR 435 million). This corresponds to an EBIT margin before special items of 11 percent (prior year: 12.2 percent). The decline in EBIT before special items is attributable to increased research and development expenses and additional costs in connection with the Schaeffler Group's reorganization. No special items were recorded in the first quarter. With a slight increase in capital expenditure, free cash flow improved compared to the prior year quarter. Due to seasonal factors, it amounted to minus 71 million euros (prior year: minus 130 million euros). On this basis, consolidated net income amounted to 240 million euros (previous year: 279 million euros). This corresponds to earnings per share of EUR 0.36 in the first quarter of 2018 (previous year: EUR 0.42)

Automotive OEM grows faster than the market

The Automotive OEM division's revenue increased by 3.2% to around 2.3 billion euros in the reporting period after adjusting for currency effects. Compared to global automobile production, which fell by 0.7 percent in the same period, the Automotive OEM division grew significantly faster than the market and outperformed it by around 4 percent. All four divisions of the Automotive OEM division contributed to this growth. This also includes the "E-Mobility" division, which was reported for the first time and whose revenue increased by 6.6 percent in the first quarter after adjusting for currency effects. Currency-adjusted revenue growth was particularly strong in the Greater China region at 12.4 percent, followed by the Americas region at 3.7 percent. In contrast, Asia/Pacific and Europe only recorded slightly positive growth of around 0.5% each. On this basis, the Automotive OEM division generated EBIT before special items of 217 million euros (previous year: 275 million euros). The EBIT margin before special items amounted to 9.5 percent in the first three months (previous year: 11.9 percent). Among other things, this was due to start-up costs for the ramp-ups in the second half of the year as well as rising development expenses and upfront expenditure for the accelerated implementation of the "E-Mobility" initiative as part of the "Agenda 4 plus One" program for the future. Based on an increasing number of new ramp-ups in the second half of the year, the Automotive OEM division continues to anticipate currency-adjusted revenue growth of 6 to 7 percent and an EBIT margin before special items of between 9.5 and 10.5 percent for the 2018 financial year.

Automotive Aftermarket records slight decline in sales

With sales of 446 million euros (previous year: 484 million euros), the Automotive Aftermarket division recorded a slight temporary decline in sales of 4.4% after adjustment for currency effects in the first quarter. This is due in particular to declining sales in the Europe region and the Americas region. The majority of the percentage decline in sales in the first quarter is due to positive special effects from one-off additional business with US customers in the first quarter of 2017, which could not be repeated in the first quarter of 2018. Progress was made in the development of the Greater China region. Here, currency-adjusted sales growth in the first quarter amounted to 40.9% due to the increase in demand from original equipment customers. The Asia/Pacific region also achieved strong currency-adjusted sales growth of 16.1%, which was primarily attributable to growth in the Independent Aftermarket (IAM) in the Southeast Asia sub-region. On this basis, EBIT before special items amounted to EUR 80 million (previous year: EUR 93 million). This corresponds to an EBIT margin before special items of 17.9% (previous year: 19.2%), which was slightly above the forecast for the year as a whole. The decline compared to the previous year is mainly due to the aforementioned special items in the first quarter of 2017. For the year as a whole, the Group is forecasting sales growth before currency effects of 3 to 4% and an EBIT margin before special items of 16.5 to 17.5% for the Automotive Aftermarket division in 2018.

Strong growth in the Industrial division

The Industrial division increased its sales in the first quarter to 826 million euros (previous year: 782 million euros). This corresponds to a currency-adjusted growth rate of 10.8%. The Industrial division thus grew significantly faster than expected due to market conditions. The Industrial Distribution sector, whose sales increased by 12.4% on a currency-adjusted basis, played a decisive role in this. The Railway, Raw Materials, Offroad, Power Transmission and Industrial Automation sectors also contributed to the increase. Regionally, the Greater China region recorded the strongest currency-adjusted sales growth of around 40 percent, followed by the Europe region with 8.2 percent, the Americas region with 5.4 percent and the Asia/Pacific region with 3.2 percent. Before special effects, the EBIT margin improved to 11.4% (previous year: 8.6%) with EBIT amounting to EUR 94 million (previous year: EUR 67 million). This improvement was due in particular to the significant increase in demand and the improved cost structure as part of the "CORE" initiative of the "Agenda 4 plus One" program for the future. The Schaeffler Group also reaffirms its annual target for the Industrial division for 2018 of generating revenue growth of between 3 and 4 percent excluding the impact of currency translation and an EBIT margin before special items of 9 to 10 percent.

More than 300 million euros invested

The Schaeffler Group generated free cash flow of minus EUR 71 million in the first quarter of 2018 (prior year: minus EUR 130 million). This figure includes cash outflows of 2 million euros (prior year: 19 million euros) related to M&A activities in the first quarter. With a slight increase in current assets, payments for investments amounted to 306 million euros (previous year: 299 million euros). This corresponds to an investment ratio of 8.6% (previous year: 9.1%). At the same time, the Schaeffler Group's financing situation has improved further. With a slight increase in net financial debt, the gearing ratio, i.e. the ratio of net financial debt to equity, improved to approximately 89 percent (end of 2017: 93 percent).

The number of employees rose by 1,263 compared to the end of December 2017 to 91,414 at the end of March 2018, an increase of 1.4%.

Transformation accelerated

As most recently presented at Schaeffler AG's Annual General Meeting on April 20, the 20 initiatives of the "Agenda 4 plus One" program for the future are being consistently and vigorously pursued. Further progress has been made in almost all initiatives. The implementation status of the program was 40 percent at the end of March 2018. To this end, a supplementary future agreement was concluded with IG Metall on April 16, 2018, which sets out the key areas of focus and a joint approach for implementing the program.

On this basis, the Board of Managing Directors has decided to further optimize the Schaeffler Group's organizational and management structure and to realign its network of plants in addition to the "Agenda 4 plus One" program. To this end, it was agreed to dissolve the "Bearing Components & Technologies" (BCT) division, which currently operates as an internal supplier, and to bring the plants closer to the business in line with the "One Schaeffler" approach. This means that the 26 plants that are currently not directly assigned to the business will also be integrated into the divisions in the future. This is intended to improve customer focus, strengthen the divisions' responsibility for earnings and realize efficiency potential. Around 950 jobs will be lost in the course of implementing the project. Around 450 of these jobs will be in Germany. The reduction will be carried out in a socially responsible manner. There are no plans for redundancies or site closures. As stipulated in the future agreement concluded with IG Metall, the project was dealt with by the newly created steering committee. Consultations with the relevant employee and works council committees will be initiated in the near future. Full implementation of the planned measures will result in a potential improvement in earnings of around EUR 60 million, which should be fully realized by 2021. At the same time, one-off restructuring costs of around EUR 50 million are planned for 2018. These figures have no impact on the Schaeffler Group's outlook for 2018. At the same time, the measures announced will contribute to achieving the Schaeffler Group's financial ambitions for 2020 on a sustainable basis.

The Schaeffler Group maintains its outlook for 2018 and anticipates revenue growth of 5 to 6 percent excluding the impact of currency translation, an EBIT margin before special items of 10.5 to 11.5 percent, and free cash flow before cash in- and outflows for M&A activities of approximately 450 million euros. In view of the large number of new start-ups in the Automotive OEM division, it can be assumed that the division's growth momentum will accelerate further in the second half of the year.

Klaus Rosenfeld, CEO of Schaeffler AG, was satisfied with the course of business in the first quarter and said: "Despite the very challenging market and competitive conditions, we have started the 2018 financial year as planned. The measures of our 'Agenda 4 plus One' program for the future are beginning to take effect. We are accelerating our transformation with the agreed realignment of our plant network. The pace of growth in the Automotive OEM division will also accelerate further in the second half of the year. On this basis, we are confident that we will achieve our outlook for the 2018 financial year." kp