Bulletin: ZF Friedrichshafen's Profit Warning Further Erodes Its Rating Headroom

This report does not constitute a rating action. PARIS (S&P Global Ratings) Oct. 4, 2024--S&P Global Ratings today said that German auto supplier ZF Friedrichshafen's (BB+/Negative/--) revision of its 2024 operating margin and free cash flow guidance further reduces the company's rating leeway. We now expect very weak metrics for the rating this year and believe further improvements in the group's profitability, leverage, and cash conversion metrics next year could be slow to appear (see " ZF Friedrichshafen Outlook Revised To Negative On Slower Cash Flow Improvements; 'BB+' Ratings Affirmed ," published Aug. 20, 2024, on RatingsDirect). The company materially revised down its 2024 operating margin guidance to 3%-4% from 4.9%-5.4% previously and free cash flow expectations to above €100

...October 4, 2024 This report does not constitute a rating action. PARIS (S&P Global Ratings) Oct. 4, 2024--S&P Global Ratings today said that German auto supplier ZF Friedrichshafen's (##+/Negative/--) revision of its 2024 operating margin and free cash flow guidance further reduces the company's rating leeway. We now expect very weak metrics for the rating this year and believe further improvements in the group's profitability, leverage, and cash conversion metrics next year could be slow to appear (see "ZF Friedrichshafen Outlook Revised To Negative On Slower Cash Flow Improvements; '##+' Ratings Affirmed," published Aug. 20, 2024, on RatingsDirect). The company materially revised down its 2024 operating margin guidance to 3%-4% from 4.9%- 5.4% previously and free cash flow expectations to above 100 million from above 800 million. We understand that the main reason for the revision is much-lower-than-expected production volumes including order cancellations from light vehicle original...

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