ZF forecasts modest growth in 2022, citing Ukraine war, inflation and COVID-19

ZF Friedrichshafen tempered expectations for 2022, saying growth will be "moderate" because of rising inflation, supply chain bottlenecks tied to the war in Ukraine and the continuing COVID-19 pandemic.

The supplier reported that sales last year grew by 18 percent to 38.3 billion euros ($42.2 billion).

Adjusted earnings before interest and taxes (EBIT) was 1.9 billion euros, compared with 1 billion euros in 2020. Adjusted EBIT margin was 5 percent versus 3.2 percent in 2020.

Adjusted free cash flow was 991 million euros, compared with 994 million euros in 2020.

"Despite the arrival of strong headwinds during the course of the year, we have remained firmly on course and achieved the targets we set at the start of the year," said CEO Wolf-Henning Scheider, who announced that he would be stepping down at the start of 2023.

ZF is not publicly listed. The Zeppelin Foundation, which is administered by the city of Friedrichshafen, controls 94 percent of the company’s shares.

It ranks third on the Automotive News list of top 100 global suppliers, with sales to automakers of $33.4 billion in 2020.

ZF is forecasting sales of 40 billion euros in 2022, with an adjusted EBIT margin of 4.5 to 5.5 percent. Free cash flow is predicted to be 1.5 billion to 2 billion euros.

"Business conditions remain highly challenging and volatile," it said.

ZF said the semiconductor shortage cost the company about 2.7 billion euros in sales due to lost auto production.

ZF’s competitors have also issued warnings about 2022.

Continental sees a margin of 5.5 percent to 6.5 percent, but said the effects of the war in Ukraine remained unclear, and that it expects a rise in procurement and logistics costs of 2.3 billion euros.

The largest global supplier, Robert Bosch, which is also not a publicly traded company, said last month that the semiconductor shortage and raw-materials cost increases would weigh heavily on automakers in 2022.

By region, ZF's European sales were up 13 percent to 17.3 billion euros; North American sales increased 19 percent to 10.2 billion euros; and Asia-Pacific sales were up 9 percent to 9.4 billion euros.

Looking farther ahead, Scheider said ZF was well positioned to take advantage of trends such as electrification and connectivity. 

The supplier is also reallocating its business away from passenger cars, with 73 percent of revenues in 2021 coming from the sector compared with 80 percent in 2019. Commercial vehicles made up 18 percent of revenues in 2021, an increase from 12 percent in 2019.