ZF Group CEO Ke Haozhe: Continue to focus on profitable growth and electric drive business
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As a global technology company, ZF Group has achieved its 2023 performance expectations. Amid the dramatic fluctuations in the global economy, the company’s sales reached 46.6 billion euros (43.8 billion euros in 2022), a year-on-year increase of 6.5%. Adjusted EBIT of €2.4 billion (2022: €2.0 billion); adjusted EBIT margin of 5.1% (2022: 4.7%). Based on the good performance of free cash flow in the second half of 2023, ZF repaid approximately 2 billion euros of debt and reduced net debt by 400 million euros to less than 10 billion euros.
In 2023, ZF’s China market sales will reach 8.1 billion euros (7.7 billion euros in 2022).
Dr. Holger Klein, CEO of ZF Group, said at the financial report conference in Friedrichshafen: “2023 is a year for ZF to make major decisions in multiple areas: We We have re-adjusted the company’s transformation route and focused on competitiveness and profitability. Thanks to the unremitting efforts of all employees of the ZF Group, we have achieved our performance expectations. In 2024, we will continue to forge ahead and develop a more focused, efficient and A competitive development path.”
Dr. Holger Klein, CEO of ZF Group
As Dr. Ke Haozhe mentioned, ZF Group has made many important decisions in 2023. First, the passenger car chassis technology division and the active safety technology division were merged into a new comprehensive chassis solutions division. The merger was completed on January 1 this year. In addition, the spin-off of the Passive Safety Systems Division has also been initiated. Dr. Ke Haozhe said, “The spin-off of the Passive Safety Systems Division is progressing smoothly. We are studying options for future development, which may include a full or partial sale, or an initial public offering.” Another major move is with the world’s largest electronic product manufacturer Foxconn has established a joint venture for passenger car chassis systems, ZF Chassis Module Co., Ltd.
In the field of autonomous driving, ZF has focused on becoming an outstanding supplier of autonomous driving technology and engineering services. This decision is of groundbreaking significance for the group’s long-term positioning. Dr. Ke Haozhe said: “Such a decision will ensure that we continue to implement the group strategy on a solid basis. Our broad product portfolio allows us to focus on investment in profitable growth areas and electric drive areas, and provide pure electric, hybrid and electric drives based on customer needs.” Power and conventional drives offer a wide range of products.”
In order to improve its competitiveness globally and respond to weak markets, the ZF Group will implement performance plans with an increased focus on improving its cost position and structure. By the end of 2025, the entire group plans to reduce costs by 6 billion euros. To achieve this goal, the ZF Group will take corresponding measures in five core areas, including economies of scale in material procurement, increasing productivity, improving R&D costs, optimizing the cost structure of corporate functions, and scrutinizing the target uses of investments. Dr. Ke Haozhe said that cost optimization will lay a solid foundation for ZF’s further transformation to electrification in the next five years and beyond.
The group’s newly issued bonds are popular
In fiscal year 2023, ZF Group’s sales reached 46.6 billion euros (43.8 billion euros in fiscal year 2022), a year-on-year increase of 6.5%. Organic growth reached 9%, the difference mainly affected by currency exchange rates. Organic sales in the Commercial Vehicle Solutions division grew by around 20% to 8.7 billion euros (2022: 7.5 billion euros), outpacing the overall commercial vehicle market which grew by 15% last year. Europe is still the largest sales region, accounting for 44%; followed by North America, accounting for 28%; Asia Pacific and India accounted for 24%.
ZF Group adjusted EBIT of €2.367 billion (2022: €2.038 billion), adjusted EBIT margin of 5.1% (2022: 4.7%), adjusted free cash from M&A activities Flows of €1.382 billion (€544 million in 2022). Net debt at the end of 2023 was 9.982 billion euros (2022: 10.378 billion euros); the equity ratio fell from 22.1% to 19.7% due to the negative impact of exchange rates and valuations.
In fiscal year 2023, ZF Group repaid debt totaling approximately 2 billion euros. According to the green finance framework, ZF Group has issued a total of three bonds: In February 2023, ZF issued a fixed-interest green euro bond of 650 million euros under the Debt Issuance Plan (DIP). In April 2023, ZF entered the U.S. bond market again, with an issuance volume of US$1.2 billion. In September 2023, ZF issued another fixed-interest green bond in the market with a total amount of 650 million euros. Michael Frick, Chief Financial Officer of ZF Group, said: “The enthusiastic reception of these bonds is a testament to the market’s recognition of ZF Group and our transformation capabilities. With the successful issuance of these bonds, Even if financial market conditions change, we can ensure long-term stable development.” The 800 million euro green bond (five-year term, coupon rate 4.75%) issued on the market at the end of January this year was eight times oversubscribed.
Michael Frick, Chief Financial Officer of ZF Group
In the field of research and development, the ZF Group continues to increase its efforts. In fiscal year 2023, the group’s R&D expenditure reached 3.5 billion euros, slightly higher than the 3.4 billion euros in the previous year. R&D expenditures account for 7.6% (7.8% in 2022). The total investment in property, plant and equipment is €2.2 billion (€1.9 billion in 2022), equivalent to 4.8% of the total investment (4.3% in 2022).
As of December 31, 2023, the ZF Group had 168,738 employees worldwide (2022: 164,869).
Fiscal Year 2024 Outlook
Looking forward to the outlook for fiscal 2024, we remain cautious. The economic environment continues to be weak due to inflation and geopolitical conflicts. Based on stable exchange rates and planned corporate transactions, ZF Group expects sales to exceed 45 billion euros in 2024, achieving organic growth of 5%. Based on the expectations of the sales and purchasing market and cost control, ZF Group forecasts that the adjusted EBIT margin will be between 4.9% and 5.4%, and the adjusted free cash flow based on the company’s transactions is expected to exceed 800 million euros.
Spend huge sums of money to create safe and clean transportation
ZF Group CEO Dr. Holger Klein announced that ZF Group plans to invest nearly 18 billion euros globally by the end of 2026. Of this amount, approximately 10.6 billion euros will be spent on research and development, and more than 7 billion euros will be invested in real estate, plant and equipment.
With the continuous enhancement of competitiveness, ZF’s production sites in Germany will receive 30% of the group’s total investment. In the context of implementing the performance plan, Dr. Ke Haozhe explained: “We see that Germany has many advantages as a production base, but we are also aware of its realistic pattern in international competition. We hope to solve these problems in a targeted manner through the performance plan . ZF is proactive, bold in innovation, and marches towards the industry leader with the belief that it must win. If the overall conditions are suitable and the cost structure in Germany is improved, we are ready to invest heavily in Germany.”
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