FRANKFURT (Reuters) - German auto supplier ZF said research and development costs for electric and autonomous cars technology would remain at high levels after it posted a 4.5 percent rise in operating profit to 2.3 billion euros (£2 billion) boosted by transmission sales.
In 2017, the Friedrichshafen, Germany-based supplier spent 2.2 billion euros on research and development, an increase of almost 15 percent compared to 2016.
“This year, significantly more than 2 billion is set to be channelled into development work around the world, with the aim of advancing electric drives and the hybridization of transmission technology as well as vehicle safety systems and automated driving,” ZF said in a statement on Thursday.
It added it was building two new factories for electric drive components.
Despite the investments, ZF is aiming to achieve an adjusted EBIT margin of around 6 percent and an adjusted free cash flow of over 1 billion euros. The adjusted EBIT margin in 2017 was equal to the previous year’s, at 6.4 percent, the company said.
In 2017, group sales rose to 36.4 billion euros. Next year ZF expects sales of around 36.5 billion euros, it said.
ZF was able to cut gross debt to 6.4 billion euros, almost half of the original amount since it acquired U.S. based rival TRW in 2015, the company said.
ZF said cutting down its debt had helped it to get re-rated to investment grade level BBB- by Standard & Poor’s.
Reporting by Edward Taylor; Editing by Victoria Bryan