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Another Warning

30 July 2019 by jbchevrel

Schaeffler (SHAEFF) pre-released some of its to-come Q2 numbers along with a profit warning overnight. In Q2-19, sales -2% YoY EBIT -29.7% YoY FCF came €6m (vs. -€5m in Q2-18). FY19 guidance was adjusted, with sales growth guided to [-1%,+1%] from [+1%,+3%] previously. EBIT margin was guided [7%,8%] from [8%,9%] previously. FCF was guided [€350m,€400m] from c€400m previously. In the light of July 12 Grapple, this profit warning is not surprising. Indeed, there has been several guidance revisions from other firms of this sector, including most importantly Daimler (DAIGR). Nevertheless, consensus still looks like it may need to come down marginally as a result. Q2 itself looks in line to slightly better than feared although Auto margins disappointed (sequentially deteriorating), offset elsewhere. Other black swans for this industry include US tariffs and and a no-deal Brexit. Today SHAEFF 5y CDS is wider +4bp. Beyond that, it is worth noting that British carmakers miners & industrials joined financial companies in the move wider, with in particular Glencore (GLENLN) wider +17 Rolls Royce (ROLLS) wider +8 and Jaguar Land Rover (TTMTIN) wider +12.