The world’s largest automotive supplier is raising fresh money for its investments with a billion-dollar bond issue.
(Photo: dpa)
Stuttgart At 4.5 billion euros, Bosch has placed the largest bond in the company’s more than 137-year history. “With the bond issue, we are expanding our financial leeway to be able to finance advance payments for the future or also acquisitions,” said Bosch CFO Markus Forschner on Friday.
Despite the challenging framework conditions, Bosch wants to significantly increase the pace of growth and ensure strong further development for us, explained Forschner. The foundation group is using the fresh money to equip itself for the tough cut-throat competition in electromobility and digitization.
Most recently, the group announced the takeover of a chip factory in California for 1.5 billion euros. In Dresden, the company is investing another billion in the expansion of the chip factory, and a new factory for heat pumps is also to be built in Eastern Europe.
Bosch is investing billions in electromobility
In addition, the Group has invested more than five billion euros in the transformation to electromobility over the past ten years. In the process, Bosch has brought in orders worth billions. However, the ramp-up is expensive and the automotive suppliers have so far hardly made any money with the components for electromobility.
Bosch also needs money for digitization. The number of software engineers is expected to increase from 44,000 to 50,000 in the next two years. Group CEO Stefan Hartung is driving the use of artificial intelligence.
“Even if we have the necessary funds and a high level of financial solidity, we have to maintain the difficult balance between investing and cost discipline,” Forschner said at the beginning of the month. Most recently, the free cash flow was four billion euros.
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According to its own statements, Bosch intends to take advantage of opportunities in existing, related and new business areas in order to grow across all regions of the world and to be one of the top three suppliers in relevant markets. In the coming years, with normal inflation, the average increase in sales should be six to eight percent a year and the return should reach at least seven percent.
In the past 15 years, it was precisely the earnings targets, which are intended to ensure the independence of the company in the long term, that were missed more often than achieved. Last year, the return was 4.3 percent.
Interest burden of the car supplier increases
With an equity ratio of 46 percent and a high long-term credit rating of A (outlook “stable”) from the rating agencies Standard & Poor’s and Fitch, the capital market has great confidence in the company. According to the accompanying banks, the originally targeted issue volume of three billion euros was oversubscribed several times shortly after the start of marketing. Due to the high demand, Bosch has increased the issue volume in order to secure attractive conditions in the long term.
The individual tranches have terms of four to twenty years and coupons of between 3.625 and 4.375 percent. As a result, the company’s interest burden should almost double from the last 240 million euros. Bosch last issued long-term bonds for 750 million euros and 250 million euros in 2014.
According to the company, many well-known investors in Germany and abroad have subscribed to the current bond, including primarily banks, asset managers and other institutional investors. “The rapid oversubscription of the order volume illustrates the confidence of investors in the performance and growth targets of the company,” emphasized CFO Forschner.
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