Supplier Schaeffler Is Working on Entering the Defense Industry

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Schaeffler is considering entering the defense industry. Meanwhile, the supplier is under pressure due to losses.

The automotive and industrial supplier Schaeffler is considering whether a larger entry into the defense industry could be worthwhile. "We are in the process of developing new growth areas – primarily focusing on humanoids and defense. Intensive efforts are being made," said Schaeffler CEO Klaus Rosenfeld to the German Press Agency.

Rosenfeld had hinted some time ago that Schaeffler could indeed supply components for the defense industry. "Modern defense technology relies heavily on the integration of hardware and software," he said in an interview with the German broadcaster n-tv. Currently, the company only supplies a small amount to the defense sector as part of its aerospace business in the USA.

Revenue and Earnings Below Expectations

The supplier came under greater pressure in the second quarter than had already been feared. While the Franconian company was able to grow in the business of recovering electromobility after the acquisition of drive specialist Vitesco, the weak economic environment slowed the group in its traditional auto supply segment as well as in its core business of roller and ball bearings. The weak dollar also had an impact. Revenue and operating profit fell short of expectations, and ultimately, the company even posted a loss.

Analyst Vanessa Jefferies from the US investment bank Jefferies attributed the disappointing development of the operating result primarily to the roller and ball bearing division. The confirmation of the company's forecast is helpful in light of the headwinds from exchange rates.

Exchange Rates Weigh on the Balance Sheet

Revenue fell by 5.7 percent year-on-year on a comparable basis to 5.9 billion euros (approx. $6.9 billion USD), the company announced on Wednesday in Herzogenaurach. Excluding currency effects, the decline would have been only 2.2 percent. The adjusted earnings before interest and taxes, excluding special effects, decreased by 15.8 percent to 205 million euros (approx. $235 million USD). The corresponding margin dropped by 0.4 percentage points to 3.5 percent. Analysts had expected a smaller decline.

CEO Klaus Rosenfeld spoke in an analyst conference of a significant burden from exchange rates and tariffs. CFO Claus Bauer attributed the performance in the Powertrain and Chassis division – the traditional automotive supply segment – to Schaeffler's strong presence with major automakers Volkswagen and Stellantis, making it influenced by the general market environment in Europe.

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Revenue Forecast Significantly Above 20 Billion Euros

The bottom line was a net loss of 40 million euros (approx. $47 million USD) compared to a profit of 33 million euros (approx. $38.5 million USD) a year earlier. The financial result was weaker, and taxes also had a greater impact. CEO Rosenfeld confirmed the annual forecasts for 2025. Revenue is expected to land between 23 and 25 billion euros (approx. $27–$29 billion USD). The adjusted operating margin is projected by management to be between 3.0 and 5.0 percent.

On September 16, Schaeffler will host a Capital Markets Day, during which the mid-term targets following the acquisition of Vitesco will be presented. The new CFO Christophe Hannequin, succeeding Claus Bauer, will already present the figures. He takes over on September 1.