Inflation surge puts pressure on Bosch profits

THE world's largest auto supplier Bosch said on Wednesday (May 4) its profit margins would feel the squeeze from rising costs pushed by soaring prices for energy.

Pressures on the group were "growing considerably, primarily due to increases in the cost of energy, raw materials, and logistics," Bosch's chief financial officer Markus Forschner said in a statement.

Bosch said it no longer expected to match its 2021 operating profit margin, instead reckoning with a figure between 3 and 4 per cent.

The group said its forecast that the global car market would grow 9 per cent in 2022 "will probably not be met either", as coronavirus lockdowns in China depress demand and a lack of semiconductors continues to put the brakes on the industry.

Inflation in the eurozone reached 7.5 per cent in April, an all-time for the currency club, with similar multi-year highs seen in other regions.

The inflation surge can be traced back to the Russian invasion of Ukraine, which has driven up energy prices and added to the supply disruptions caused by the coronavirus pandemic.

"Prices have roughly tripled since 2020", receiving an extra "push" from the war in Ukraine after a temporary lull in rises, CEO Stefan Hartung said in a speech.

The future impact of the war "cannot be predicted", Hartung said, saying the company would plan on the basis of "sustained high prices".

Nonetheless, the group "got off to a solid start" in the first quarter of 2022, CFO Forschner said, with sales rising by 5.2 per cent on the same period last year.

It comes off the back of a year in which the Stuttgart-based firm saw its revenues increase by 10.1 per cent to 78.7 billion euros.

The group's operating profit also increased by over 50 per cent in 2021 to 3.2 billion euros.

Bosch said it would be ploughing some 500 million euros by 2030 back into a new hydrogen electrolysis venture.

The fuel is considered an alternative to fossil fuels for heavy vehicles and industry.

"Electricity-based solutions have priority, but hydrogen-based solutions also need to gain more momentum," Hartung said. AFP