(Reuters) – German machine and car parts maker Schaeffler AG reported on Tuesday an almost 30% drop in second quarter core profit, hit by a slump in earnings in its bearings and industrial solutions division, particularly in Europe and China.
Earnings in the industrial solutions business slid 67.7% from a year earlier, dragging down group-wide earnings before interest, taxes and special items, which fell 29.4% from a year earlier to 204 million euros ($223.07 million) for the quarter.
Schaeffler has been hit by a slowdown in manufacturing globally and said it saw weaker demand from industry in Europe in the second quarter and increased competition in China for bearings for wind turbines.
Europe is Schaeffler’s biggest market, accounting for about 45% of its sales last year.
Pressure on both volume and price appeared to be more persistent in the second quarter than Schaeffler had expected, said Pal Skirta, an analyst at Metzler.
“This is consistent with weak Q2 GDP figures from China, poor industrial order intake in Germany, and recessionary indicators in the U.S.,” he said.
Though Schaeffler said second quarter revenue for the group as a whole rose by 4.2% in constant currencies to 4.2 billion euros, margins at the bearings and industrial solutions division, which fell from 7.4% to 2.5%, were affected by both volumes and sales prices.
Revenue at the division fell 4.5%.
Schaeffler, which is merging with Bavarian drivetrain maker Vitesco Technologies, had cut its guidance for the new combined entity in July after Vitesco had lowered its own guidance, warning of weak demand from carmakers.
($1 = 0.9145 euros)
Reporting by Louis van Boxel-Woolf; Editing by Susan Fenton
