RENNINGEN, Germany -- Robert Bosch said earnings before interest and taxes rose to 5.5 billion euros ($6.2 billion) last year from 4.9 billion in 2017. Revenues increased to 78.5 billion euros from 78.1 billion, the supplier said Thursday.
Sales at Bosch's Mobility Solutions Services division, which contributes about 75 percent of revenues, rose 3.5 percent to 47.6 billion euros, with strong growth in exhaust systems treatment and sensors, and electrification products. Profit margin for the division was 7.1 percent.
Bosch issued a warning that 2019 sales will stagnate in the face of a slowdown in the global economy, continuing trade disputes and, in Europe, the effects of Brexit.
The German supplier forecasts that global automotive production will fall by 3 percent this year to 95 million vehicles, the first time since the 2008 financial crisis that production has fallen in two consecutive years.
CEO Volkmar Denner said said Bosch’s profit margin this year would be around 6 percent, compared with 7 percent in 2018, as it increased capital expenditures and research investments.
He noted, however, there is not a direct correlation between auto production and sales for suppliers such as Bosch. "Bosch has often grown faster than output because cars feature more and more technology -- a lot of that comes from Bosch -- and thus our share in each car grows," he said.
Automakers and suppliers are grappling with a downturn in vehicle demand, especially in China, the world’s largest vehicle market. Continental said on Thursday it was not expecting a market upturn until the second half of this year as it reported a 22 percent slump in first-quarter net profit.
In Europe, Bosch’s largest market, sales revenue rose by 3.3 percent, to 41.4 billion euros, but the supplier is concerned about an expected drop in production in Germany. North American sales rose by 2.7 percent to 12.3 billion dollars, though Bosch expects a slight decline in production.
In the Asia-Pacific-Africa region, which includes China, Bosch's largest single market, sales were up just 0.7 percent in the face of a persistent slump in Chinese auto production and sales. Sales to automakers in China were 10.5 billion euros in 2018, an increase of 1 percent. The Chinese market accounts for 22 percent of Bosch Mobility division sales.
"The market got off to a very poor start in the first quarter," said Stefan Hartung, the chairman of Bosch's Mobility Solutions Services division. "There will be some catching up in the third and fourth quarter, but we expect growth for the year will be less than zero."
Hartung said he was optimistic that the Chinese market will eventually pick up again, with vehicle ownership rates only 25 percent those in Germany.
The supplier is banking on electrification for future growth in China; sales of so-called New Energy Vehicle components doubled from 2017 to 2018, and Bosch will open an electric axle factory in Taicang this year. Last year Bosch opened a plant in Wuxi to make 48-volt batteries, which are at the heart of mild hybrid systems that automakers are counting on to improve efficiencies in internal combustion engines.
Slowing growth in India will also be a factor in the region, Bosch said.
A path to carbon neutrality
CEO Denner said Bosch plans to become fully carbon neutral by 2020, making it the first major industrial company to take that step. Rising sea levels, extreme weather conditions, drought and flooding made it imperative for companies to act without delay to stop the planet from overheating and endangering global stability, he said.
"Climate change is not science fiction. It's really happening," Denner said. "Global warming will not miraculously solve itself. That is wishful thinking."
Bosch's drive for carbon neutrality was not motivated by any effort to repair automakers’ battered image following the Volkswagen diesel emissions cheating case, he said.
Bosch has agreed to pay hundreds of millions of dollars in settlements and fines related to emissions cases against Volkswagen Group and Fiat Chrysler Automobiles.
Bosch said it currently emits around 3.3 million metric tons of C02 emissions every year. Manufacturing accounts for around one third of global carbon dioxide emissions, according to the International Energy Agency.
The Stuttgart-based company aims to achieve its goal by increasing energy efficiency, expanding the share of renewables in its energy supply to as much as 40 percent, buying in more green power and offsetting unavoidable CO2 emissions. Bosch will incur a total of 2 billion euros by 2030 in added costs by buying green electricity, engaging in carbon offset programs, and sourcing power from renewables, the company said. It will also one billion euros to make its factories more energy efficient.
"Companies like Bosch cannot wait," Denner said. "This is our moon-shot project."
Bosch ranks No. 1 on the Automotive News list of the top 100 global suppliers with worldwide original-equipment automotive parts sales of $47.5 billion in 2017
Reuters contributed to this report