German auto parts supplier Schaeffler (>> Schaeffler AG) said sales at its industrial division likely returned to growth in the first quarter after three years of declines.
Sales in industrial operations, which accounted for nearly a quarter of Schaeffler's 13.4 billion euros (11.2 billion pounds) of group revenue in 2016, are beginning to stabilise, Chief Executive Klaus Rosenfeld said on Wednesday.
Growth at the automotive division, which makes components for transmissions and engines used by major carmakers including Volkswagen (>> Volkswagen AG) and Daimler (>> Daimler AG), continues to outpace global car markets, the CEO said.
"We have started well this business year," Rosenfeld said at Schaeffler's annual general meeting in Nuremberg.
But it will be difficult to sustain strong margins in automotive operations given rising steel prices, high R&D costs and heightening competition, the CEO said. Last year, the division reported a 14.4 percent margin before special effects, compared with 7 percent in industrial operations.
Counting on new business opportunities from an expected rise in demand for electric cars, the increasing web-connectedness of traditional industry and digitisation, Schaeffler aims to increase sales by as much as 6 percent per year by 2020, compared with 3.4 percent last year.
Schaeffler, which owns a 46-percent stake in rival Continental AG (>> Continental AG) and is listed on Germany's mid-cap index MDAX <.MDAXI>, is scheduled to publish first-quarter results on May 11.
(Reporting by Andreas Cremer; Editing by Maria Sheahan)