Strong sales base allows company to focus on high-tech

ZF Friedrichshafen AG, a pioneer in automotive parts and system innovation, reported outstanding financial performance in 2016.

The group's sales revenue reached 35.2 billion euros ($37.44 billion) in 2016, a year-on-year increase of 20.6 percent, according to ZF's latest statements, released on March 30. The adjusted earnings before interest and taxes (EBIT) margin stood at 6.4 percent and adjusted free cash flow totaled 2 billion euros.

The acquisition of TRW, one of the former safety parts developers and suppliers in the United States, in May 2015 strongly boosted ZF's performance in 2016. TRW was integrated into ZF as Active and Passive Safety Technology Division immediately after the acquisition. As a result, sales revenue from the new division was included for the first time in the ZF group for the whole of 2016.

ZF said its organic growth without exchange rate effects as well as buying and selling activities was 4.2 percent.

"ZF flexed its muscles in 2016 with outstanding business figures and innovative products," said Stefan Sommer, CEO of ZF. "This strength gives us a solid foundation to help shape the challenging transformation of the automotive industry through digitalization, e-mobility and autonomous driving."

In 2016, the group reduced its debt from the TRW acquisition by 1.6 billion euros. Further debt reduction remains a central target for 2017, according to the company.

"Our sound income and financial power in 2016 as well as our strong free cash flow of more than 2 billion euros allows us to quickly reduce the debt from the TRW acquisition and simultaneously invest in future technologies," said Konstantin Sauer, ZF's chief financial officer.

ZF is increasing research and development investment in response to rapidly changing global automotive demand.

A total of 2 billion euros was invested in research and development last year, which accounts for 5.5 percent of its sales revenue, according to ZF. The proportion was 4.8 percent in 2015.

The company said the increase resulted primarily from intensified development activities in the active and passive safety technology and e-mobility divisions.

"ZF is grasping the opportunity of fundamental changes in the automotive industry to transform into a leading technology company in e-mobility and autonomous driving," Sommer said.

ZF is counting on combined development of mechanical and electronic systems to cater to future demand.

"The car of the future will still rely on mechanical components," Sommer said. "Even an 'iPhone on wheels' needs brakes, a steering system, axles and the rest.

"Our strength is our combination of hardware and software. So we produce intelligent mechanical systems."

By the end of 2016, the number of personnel in ZF's research and development workforce reached 14,550.

ZF is maintaining a positive attitude toward growth in the global market in 2017. The company is targeting sales of approximately 36 billion euros and an adjusted EBIT margin of more than 6 percent.

"Starting from this position of strength and financial stability, we can afford to invest heavily in future-oriented technology," Somner said. "This will secure jobs for our employees over the long term."

(China Daily 04/21/2017 page24)