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Recovery for Bosch as it warns of slowdown

Business news |
By Nick Flaherty

Bosch is warning of higher costs from supply chain issues with a slowdown as it reported recovered profits in 2021.

The war in Ukraine is a key issue, says Dr. Stefan Hartung, chairman of the board of management at Robert Bosch.

“It’s worth taking a closer look at how the war affects climate action. My assessment is nuanced: in the short term, the acute conflict will slow progress in reducing carbon emissions, but in the long term, it will accelerate the technological transformation in Europe,” said Hartung.

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“First, we are opting for electrification. Assuming it uses green electricity, this is the fastest route to climate neutrality. Bosch has solutions for this – both heat pumps for buildings and electrical powertrain systems for vehicles. We are investing in both, and growing faster than the market in both,” he said.

“Second, we are opting for hydrogen and developing the applications for it. Green hydrogen is essential if we want to make our world climate neutral. Contrary to what some people believe, hydrogen is by no means something that only the steel and chemicals industries need. It makes sense to use it in nearly every sector – whether in buildings as a replacement for natural gas, or in order to wean trucks and machinery off diesel. Technologically, there is nothing to prevent this.

“As a green fuel, hydrogen can be easily transported and imported. It will be up to the markets to find economical solutions for its distribution. In concrete terms, this means establishing filling-station infrastructure for hydrogen-powered vehicles and incentivizing hydrogen-ready gas-fired boilers, also in hybrid systems that are combined with a heat pump. Bosch wants not only to use hydrogen technology, but also to be one of the companies manufacturing it. That’s why we will enter the components business for hydrogen electrolysis by mid-decade,” he said.

He also points to digitalisation as key for growth.

“Over the next three years, we will be investing another ten billion euros in digitally transforming our business,” he said. “When software-defined cars make their driverless and accident-free way through traffic, it will be with Bosch on board and in the cloud. To make this happen, we are developing platforms and functions in equal measure. Artificial intelligence is progressing faster than expected. Our new wafer fab in Dresden is a prime example. The AI-based quality approval system in place there helps us save time and money, reducing local startup costs by nearly 100 million euros.”

This comes as the financial results recovered.

“We were able to grow Bosch Group sales by 10.1 percent, to 78.7 billion euros, and increase our EBIT [earnings] from operations by more than 50 percent, to 3.2 billion euros,” said Dr. Markus Forschner, CFO. “We achieved all this despite the ongoing coronavirus pandemic, continued supply bottlenecks for semiconductors, and raw materials prices that were already significantly higher. In addition to our good sales figures, our extensive cost-cutting measures have also paid off.”

Mobility Solutions increased sales by 7.6 percent following the previous year’s loss. There was significant pressure on result from the increased costs for chips, raw materials, and logistics  and the business sector is particularly exposed to chip shortages.

Industrial Technology benefited from the recovery of key mechanical engineering markets, achieving sales growth of 18.9 percent and an EBIT margin of 8.4 percent. After a strong showing last year, Consumer Goods was able to further increase its sales by 12.7 percent. Energy and Building Technology also performed well, with a 7.8 percent increase in sales.

But predictions for 2022 are difficult, he says.

“In light of the current circumstances, it is difficult to forecast Bosch Group sales and result for 2022 as a whole,” he said. “Besides the uncertainty as to how the situation in Ukraine will develop and what its impact will be going forward, it is currently unclear what consequences the new lockdowns in China will have for economic development. At present, we expect to exceed the 6 percent sales growth forecast in our annual report.”

“The current cost pressure is immense, especially in the Mobility Solutions business sector. It’s not just automakers that have to pass on price increases, but especially suppliers such as us as well,” he said. “The strained supply situation is being made significantly more tense by the key role Russia plays in supplying raw materials, particularly to Europe. This means we must prepare for continued high prices and very volatile markets.”

At the same time he sees a slow down in the consumer market coming.

“While demand will likely remain relatively stable in 2022, we have to prepare for a slowdown in 2023. Nonetheless, as a company, we are confident that Bosch will rise to the challenge of this difficult phase as well.”

www.bosch.com

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