The business situation of the Bosch Group: confidence for 2021
Ladies and gentlemen, on this occasion a year ago, I spoke about the huge challenges facing us in the 2020 business year. Today, I can say without fear of contradiction that we handled these challenges well. And this success gives us confidence for the current business year.
After all, 2021 will also demand a lot from us. The pandemic continues to pose significant risks. Especially in our automotive operations, moreover, we are noticing the supply shortages of semiconductors, which are very much in demand. In this fraught situation, we are doing all we can to help our customers. For some weeks now, we’ve been working on this problem in task forces involving customers and suppliers. Unfortunately, this situation cannot be expected to improve any time soon. Indeed, it seems likely that the entire industry will be confronted with this unsatisfactory situation for many months to come. Both for us and our customers, this will be a drag on business developments in a phase of economic recovery. In the long run, the automotive industry’s supply chains have to become less prone to disruption, especially when it comes to semiconductors. It is not only Covid-19 that has disrupted them, but natural disasters and fires as well. But even if so many worst-case scenarios coincide, we have to make a concerted effort to keep supply chains open to the greatest possible extent. This is also the subject of talks with our business partners.
We are systematically adjusting our Mobility Solutions business sector to areas of future importance such as electromobility, automated driving, and future electronics architectures. This calls for huge upfront investments.
We are tackling the challenges of the year ahead with optimism. Indeed, the figures for the first three months give us every reason to be optimistic,
- with Bosch Group sales growing 17.0 percent. We have to factor the significant impact of the coronavirus pandemic into this result, of course, yet even compared with the same period in 2019, sales increased 8.5 percent.
- Looking at the business sectors, we can see 13.6 percent growth in Mobility Solutions sales. In Industrial Technology, the 11.6 percent rise is attributable to the recovery of the mechanical engineering market. The Consumer Goods business sector continues to benefit from the sustained high demand for household appliances and power tools, growing by 29.4 percent. Energy and Building Technology is also performing well, with a pleasing 10.0 percent growth in sales.
- Sales performance varies considerably by region, influenced by three factors: first, the slump caused by the coronavirus pandemic last year, which affected different countries at different times; second, considerable exchange-rate effects; and third, the varying pace of economic recovery in the world’s major regions.
- Sales in Asia Pacific (including Africa) rose a nominal 37.5 percent, and 54.4 percent in China alone. In other words, sales in China were up by 26.7 percent compared with the same period in 2019. In North America, we see a decline of 3.2 percent. After adjusting for exchange-rate effects, however, sales grew 6.6 percent. In South America, the increase is 16.2 percent. In Europe, we were able to increase sales by 13.8 percent compared to 2020.
In the 2021 business year, as things stand, we’re expecting the global economy to grow by just under 4 percent, following a contraction of around 3.8 percent last year. The strongest recovery will be in Asia, followed by North America. Both regions have demonstrated appreciable progress in containing the pandemic. This progress is now also making itself felt in the service sector, and is buoying growth. In the United States, there is the additional effect of the extensive stimulus plan. In Europe, by contrast, where many countries continue to be severely affected by restrictions as a result of the rising number of coronavirus infections, the recovery will remain on hold. The result will be that economic output grows far more slowly, at barely more than 3 percent. While last year’s drop in GDP should be offset globally in 2021, we are unlikely to see a recovery from the pandemic-related losses in Europe until next year.
In automotive production, we see a risk that the semiconductor shortages will stifle the recovery that was forecast for 2021. As it is, automotive production will remain considerably below the pre-crisis level of 92 million vehicles in 2019 and the historic high of 98 million vehicles in 2017. The resulting overcapacity is a drag on the industry.
Against this backdrop, and assuming that there are no pandemic-related restrictions on a similarly severe scale to those seen in the second quarter of 2020, we currently expect the Bosch Group to grow its sales by roughly 6 percent in 2021. We also expect our Mobility Solutions business sector to grow. Our forecast at present is that growth will be between 5 and 7 percent, even if the semiconductor shortages are making this forecast difficult. For Industrial Technology, we forecast growth of some 6 percent. For Consumer Goods, the continuing positive development means that we currently expect to see sales growth of roughly 5 percent over the record level of the previous year. For Energy and Building Technology, we anticipate growth in the region of 4.5 percent.
As I mentioned earlier, 2021 will be another very challenging year as we work to ready the Bosch Group for the requirements that lie ahead. Our comprehensive program to improve our cost structures and competitiveness has put us on a solid footing in this regard, and we are continuing to rigorously apply a raft of measures. However, such measures mean that we will once again have to shoulder considerable burdens as a result of restructuring costs. That said, we’re confident that, year on year, we’ll be able to improve our margin from operations slightly to around 3 percent; excluding restructuring expenses, the margin will be roughly 4 percent. However, the difficulty of foreseeing the effects of the semiconductor bottlenecks and the pandemic means that this forecast is also uncertain. Nonetheless, 2021 will be an important milestone on our path to regaining our target margin of around 7 percent in the next 2 to 3 years.
Our positive result in 2020 creates the foundation for this – a result we achieved despite the heavy burdens of the pandemic.
In 2020, sales fell 6.4 percent to 71.5 billion euros. The basis for this comparison is the adjusted figure for 2019. In other words, it excludes the activities of our packaging machinery business, which were included in the original figure for 2019.
Despite the drop in sales, we achieved an EBIT margin from operations of 2.8 percent. Adjusted for restructuring expenses, which placed a considerable burden on result in 2020, the figure is 4.7 percent. In addition to the upturn in sales in the second half of 2020, extensive cost adjustments helped the company stay in the black – a pleasing result in light of the pandemic.
What’s more, with the exception of Mobility Solutions, all our business sectors reported a positive result from operations. And if the costs of the extensive restructuring measures are excluded, Mobility Solutions also posted a positive result. We saw a real highlight in Consumer Goods: benefiting from the sustained high demand for household appliances and power tools, the business sector reported a record high margin from operations of 11.5 percent.
Our robust financial structure should also be highlighted. At 44 percent, we retained an excellent equity ratio. And with free cash flow reaching a record level of 5.1 billion euros, liquidity was also gratifying. This gives us a solid foundation from which to turn visions of the future into concrete success.
On that note, I’ll now hand back to Volkmar Denner. You can find further details of our 2020 business figures in your press kits.