Ladies and gentlemen, thank you for standing by. I'm Stuart, your Chorus Call operator. Welcome, and thank you for joining the Group Q4 and full year 2021 earnings conference call of Schaeffler AG. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may press Star, followed by one on your touchtone telephone. Press the star key followed by zero for operator assistance. I would now like to turn the conference over to Renata Casaro, Head of IR. Please go ahead.
Thank you very much, Stuart. Dear investors, dear analysts, thank you for joining the Schaeffler Group 2021 earnings call. As usual, our call will be conducted under this disclaimer. Without further ado, I will pass the floor on to Mr. Klaus Rosenfeld, CEO of the Schaeffler Group, and Mr. Claus Bauer, CFO. Klaus, the floor is yours.
Many thanks, Renata. Ladies and gentlemen, at the beginning of our analyst conference today, please allow me to make the following statement on the situation in Ukraine. The situation in Ukraine is terrible. We are shocked by the destruction, the suffering, and the humanitarian catastrophe we are all witnessing. In particular today, our thoughts are with all the people who are affected by this war, and I should say, in particular, with all the women, the mothers, and the children that are fleeing their country. Also, in the name of all our employees, our 83,000 employees across the world, we can only hope that this war is stopped immediately.
For us at Schaeffler, the safety and the well-being of all our employees has always had highest priority, and to date, I can say that our six employees in the Ukraine and our 174 in Russia are all well and safe. Let me continue by saying, even though it is very demanding in these difficult times to focus on a normal agenda, we would like to present to you now, Claus Bauer and myself, some insights on the business development, the results for 2021, and also talk about our outlook for the year 2022. No one can predict today how the situation in the Ukraine will further develop, and I believe no one today can reliably assess the consequences of this war on the world economy, the growth perspectives for Europe, our supply chains or raw material prices.
That is why the executive board of Schaeffler AG has decided this morning to suspend the guidance for 2022, as outlined in the ad hoc message this morning. I believe and we believe together, Klaus and myself, that this is the only responsible way for a company like ours to deal with the current situation. Much upfront, ladies and gentlemen. Let me now start our presentation in the usual format. I will do a quick overview and then talk a little bit about the business highlights in 2021 before I hand over to Klaus for the financial results of the full year and also the fourth quarter. If you follow me on page four, that's the usual summary page.
While it may not be appropriate in this environment to talk too much about successes, I think I can say the full year result 2021 for Schaeffler was a successful year with strong performance, 10% growth, above 9% EBIT margin, and a free cash flow above EUR 500 million. I think that is clearly remarkable in an environment that was also, in 2021, quite challenging. This has all led to the decision and the proposal that we made to the annual general meeting, that we propose a dividend of EUR 0.50, which means a payout ratio of 44% in line with our payout range, 30%-50% of net income. What I also would like to say, we have been successful in driving our transformation.
The Roadmap 2025 is intact, and we have successfully closed our second phase of the restructuring program with the financial benefits to be expected in 2023 and 2024. That gives us some sort of a buffer for the two years to come. I'm also happy to say that in particular in Automotive Technologies, we have made good progress on the E-Mobility side. We already reported about this in the last quarterly call. We have worked continuously to sharpen our operating model and optimize the portfolio management. You will see later on that we are now in a position to give you also for the year 2021 indicative sales split for this new four-box model.
We will also see that the powertrain scenario before the war and before the crisis has been revisited, and that we have decided to further accelerate our assumptions with an earlier and faster adoption of BEV vehicles. I made my comments on the guidance, and that leads me to conclude our first page. Before I go further, let me add that in this environment diversification is key. Schaeffler is, as all of you know, not only an automotive supplier, we are an automotive and industrial supplier. We have an aftermarket division. All of that has helped us to master challenging situations in the past. I think it's a good base also going forward to be more diversified than simply being a European automotive supplier.
Page number five has the guidance of the last year. I think I can skip that. The page number six has highlights and lowlights. Also here, some already mentioned good outperformance in Automotive Technologies, 400 basis points for the full year 2021. You all know that you can't judge outperformance by quarter. If you look at the trend and the information in the backup, you see that we are continuously making up our promise of delivering continuous outperformance. E-Mobility order intake strong for the year, significantly and clearly ahead of our target. Aftermarket, strong sales performance, and you will see later increasing demand also supported by new digital offerings.
In Industrial, we're really proud to say that the recovery, the optimization of our profitability reached new heights in the year 2021. You all know about the Melior Motion acquisition. I already mentioned resilience and diversification, why this is so important. On the lowlight, clearly, the issues of the past have not been sorted out completely. The sector, in particular Automotive, is still suffering from hiccups in the supply chain. Semiconductor is one example. We clearly saw a second half that was less positive in growth than the first one. Market headwinds. COVID is not completely over, although it looks like that this situation is reducing.
A key concern that is now clearly amplified to what we're seeing in Ukraine is the increasing cost for raw material, energy, and also transportation that has already increased throughout the year 2021. With what we have today, I think it's fair to assume that this will continue. Once again, the macroeconomic, but also the environment in the different sectors is very difficult to predict. We cannot really tell you at the moment what we're expecting for the rest of the year. Page number eight, I think I can take the liberty here to do this very quickly. You can read all the numbers. Sales growth for the year, 7.4%. EBIT margin after the difficult year 2020, back to 6.9%. I think that is a good achievement.
Keep in mind that certainly the first quarter was important for this 6.9%. Page nine gives you a little bit more insight on the business highlights. Order intake for the full year for the full scope of the Automotive Technologies Division in line with the previous year, EUR 10.2 billion, EUR 5.4 billion in the first half, EUR 4.8 billion in the second half. The real interesting number is EUR 3.2 billion order intake in E-Mobility. At the right-hand side of the chart, it displays a little bit our latest product developments, whether this is the already mentioned 800V power electronics or the thermal management opportunities, the market position for 3-in-1 systems, also our further optimized technology for e-motors.
All of this sits right where customers need our support, and we feel very good about the advances and the developments in the E-Mobility division. Page 10, Aftermarket. After the 2020 growth of 13%, what is clearly strong, also supported by the Asian region and Americas. Positive price development already in 2021 to offset some of the increasing input cost. However, margin down to nearly 14%, 13.8%. Despite the improvement measures focusing on material flow and production and warehousing, we have to say that the sales development in Europe in particular was impaired by some ongoing logistical performance issues.
Here, the RKO, one of the big investments of the past is still creating some concern, and we're dealing with this as we speak, in optimizing also here our partner setup. The input cost, in particular product and freight will persist, also in 2022, and that clearly makes Aftermarket an area to watch out for. In terms of product development and offering, you know, I don't wanna spend too much time, but the whole idea of further digitalizing the division, creating more digital positive customer experience is vital to the success of the future. Let me come to page 12. Our industrial division, a good and positive development in the year 2021. You see it from growth 13.6%.
Broad economic recovery continued also in Q4. Most sectors growing double-digit. Some of the sectors that were lagging, like railway, are returning to positive growth. That also led then to a strong finish with an overall margin of 12% for the full year. If you remember our mid-term targets, then this is clearly an achievement that comes earlier than what we expected. The Melior Motion acquisition is a small acquisition. We closed it in February. You all know this, and it's a proof point again that we are serious in not only growing our business internally, but also adding where possible technological competence here, in particular, the robotic business, an area where we think we can do much more and can also generate more profits. There are some headwinds. Wind was strong.
There's a little bit of a smoother development in China. Demand normalized in aerospace and two-wheelers all before the war. We now need to see how this unfolds. Clearly also this division is impacted by higher raw material, energy, and transportation costs, while our measures to pass this on to customers are more effective than in other divisions. Last point here on page 13, the order book. You see, once again, a development for the three-month order book in the year 2021. Order book increasing sales coming down a little bit in the fourth quarter. That means continuous growth in the future. Whatever this crisis now will mean for this chart, we'll see when we present the first quarter results. Business highlights, I already mentioned.
The fact that we have here a core business with standardized and specialized bearing offerings across a variety of market clusters, it's clearly a big asset, and we are strengthening it as we speak with some bolt-on acquisitions. Page number 14 is the usual slide on capital allocation. Let me say here, I mean, you can read all these numbers. We are clearly at the moment doing what we can to analyze and monitor the situation to also revisit our plans. I can say that our strategy going forward remains for the time being in place. We're not going to change direction.
Clearly we need to see in the next weeks and months to come, how we prioritize on the CapEx side, what our CapEx plans for the next five years, how they will be adjusted. In general, the direction to drive this by reinvestment rate and clearly invest more into the Industrial division and E-Mobility remains in place while we will be maybe even more cautious than we have been before on the mature businesses. Let's wait and see what this means. The chart also tells you that this is a global company where more and more of the investment also happens outside Europe. Now, let me come to three topics that I would like to mention before I hand over to Klaus for the details on the numbers.
The first one is on portfolio management, Automotive Technologies. You see here this new chart. You all know the idea of this metrics with mature versus new and powertrain-specific versus powertrain-agnostic. What we have added on this page is the most prominent product areas that belong into these four boxes from cam phasers, mature powertrain-specific to steer-by-wire in new business and chassis systems. You see how this is allocated, and you also see as a second part of the new chart, how then these four businesses relate back to sales and sales growth. You see the biggest part is still engine and transmission. That is also heavily dependent on ICE. Bearings is something that is rather powertrain agnostic. That's the second biggest part, makes nearly 30% and has grown by 6%.
Clearly, e-mobility, EUR 1 billion for 2021. With the order intake and with the steep growth, that will continue to become bigger and bigger. Chassis systems, where we have taken out, in particular, compared to the past, the whole bearings business, the chassis bearings business is now nearly EUR 300 million, or 3% of the pie that has also grown quite a bit. I hope that gives you a much better understanding of how we are set up. It also helps us to drive then, capital allocation and also future profitability and future activities. That new setup that we will from now on report on a quarterly basis, with these numbers goes hand in hand with a revision of our powertrain scenarios for the next years.
On this page number 16, you have the old powertrain scenario, the one that was in place until year-end. You all remember the famous 30, 40, 30. 30% ICE, 30% BEV, including fuel cell, and then 40% HEV. What we're seeing from customers, what we're seeing globally is that electrification will further accelerate. The question what this crisis, what the war in Ukraine will mean for this is still open. We decided to accelerate also our scenario. Here you see that for 2025, and also for 2030, we have increased the share of pure BEV from 12 to 20 in 2025 and from 30 to 40 in 2030. That is more or less in line with what market expects.
It is, from my point of view, a prudent way to look at this. You see that 2035, the scenario, has more or less remained unchanged. It's a question of how the new technology will unfold, and we think it will accelerate and it will further be driven by the raised EV targets of our main customers. Now, second point that I would like to share is the new setup for Industrial. You have this on page 17. You all look at us as an automotive supplier. You're all rightfully so very interested in the transformation there. In Industrial, it's not so much a transformation. From my point of view, we thought about ways how to present our Industrial business in a more comprehensive manner.
You all know in the past, we shared with you eight sectors plus distribution. We never got the credit for what we're doing because this was too detailed, maybe too granular. That's why we decided in our disclosure to change course and give you in future these four market clusters. First market cluster is Renewables, wind, and also hydrogen. In particular, on the electrolyzer side will go into this market cluster. Transportation & Mobility covers everything from aerospace, rail, off-road, and two-wheelers. This is also the market cluster that then synchronizes well with the passenger cars and the light vehicle trucks and trucks on the auto side. You have Industrial Automation, clearly, in terms of growth dynamic, the most interesting sector, and then Machinery & Materials.
Also here, we will give you the numbers in terms of sales and also sales growth going forward on a quarterly basis. You have here the setup for 2021. Let me add the distribution business. That is something different than simply an aftermarket or replacement part business that made up 28% of Industrial sales in 2021 is allocated into the four market clusters so that you have a more consistent picture. You see it's for 2021 consistently so that all the areas have grown quite significantly. Third point I would like to make and there's a lot more to say. You saw the Sustainability Report we published.
You all know that we take this very serious, and we are strongly committed to turn Schaeffler into a climate neutral company. We have our targets out. We are working on our climate action plan. We all know ESG is not only E, there's also S and G. That is very important. The targets are included into our compensation. That was also the case in the years before. Going forward, it has even been further intensified. My long-term bonus is in future dependent on achieving our climate action plan with all the different milestones that you know. This topic is critical and includes employee safety, and it clearly also includes the procurement of our main materials. Let's stop here and leave you with a message.
Whatever happens next, despite this terrible war, we will continue to pursue our sustainability strategy. I personally think that this is very important not only for our future energy transition plans, but also for living up to our commitment as a socially responsible institution. With that, I hand over to you, Claus, for the financial results.
Yeah. Thank you very much, Klaus. If we go to the next slide. You see, as Klaus already alluded to, the sales in Q4 developed solidly. Remember, Q4 2020 was the peak of the V-shaped recovery of the pandemic shutdowns in Q2. Therefore, the 5.6% FX-adjusted sales decrease is to be seen in relation to that peak. We can say, especially after the weak quarter, the weak third quarter in 2021, that Q4 2021 was clearly an encouraging sales quarter. You look on the left side in the first line below the charts, you see the 9.7% FX-adjusted sales increase for the total year that Claus already mentioned.
Automotive Technologies was still weaker in Q4 than prior year. That, as we already have seen also in Claus' part, was partly offset with strong development, in particular in our Industrial division. If you look down at the bottom, you see the split by regions, and clearly see the indication that the automotive chip crisis and supply chain issues and limitation of growth in that sector was impacting Europe and Americas the most, as you would have expected. Go to the next slide. You see the gross profit development.
I think based on our Q3 call and then our follow-up call in January with most of you, it shouldn't be a surprise that you see the cost inflation for input costs phasing in. You see that in the waterfall chart on the left side in the middle, production cost was a negative impact of EUR -141 million. Significant portion of that obviously is that cost inflation that was phasing in. We said in our Q3 call that we expect around 200 basis points of impact due to the inflation and that was what really happened.
What you also see, now I'm going to the left side of the waterfall chart, you see that recovery impacts pricing actions on the customer side are also slowly phasing in. As we also indicated in earlier calls, that is mainly due to active pricing actions mainly in Automotive Aftermarket and industrial distribution. Also some impact continuing as already seen in Q3 of material price clauses that we have in place with automotive customers in North America. We go to the next slide.
Overall, then you see, most important message on that slide is that overhead costs are increasing, but that is also now due to the fact that prior years is impacted by the management of the corona crisis. You know that we used extensive short-term work capabilities in Europe and had other cost or effective cost management in place in all other regions as well. It's not so much about the Q4 to prior year comparison than really an increase of cost than really a normalization of overhead costs to a pre-pandemic level.
You look at the very bottom of the left chart, and you see the overhead ratio in Q4 was 16.6%, which is actually not a bad level. You also see that one of the main drivers is R&D expenses, which is also due to the effect that we were and have been successful in acquiring E-Mobility projects that now the R&D is kicking in for these projects. You also see somewhat an increase in selling expenses. That is partly to a normalization of overhead expenses. We are kicking off marketing initiatives that we have stopped last year because of the pandemic.
You also see, to some extent, pricing impacts, mainly in the area of logistics, reflected in the number here. EBIT, no surprise, is following pretty closely the gross profit trend, 7.8% for the last quarter in 2021, is clearly a strong sign. It's still lower than the 11.6% of prior year. Eleven point six, I would say is an anomaly, based on unprecedented volume in Q4 of last year. I said why that was. We were in the middle of the V-shaped recovery in that regard.
7.8%, especially under the circumstances with the material price inflation, is a result that we are satisfied with. You also see for the total year, and Claus already mentioned that, we ended up with an EBIT of 9.1%. Maybe a little bit more flavor and detail on the bottom right side. You see here clearly the impact in Automotive Technologies. First of all, the extraordinary volume of the prior year quarter impact, but also the in-phasing material price impacts with a margin development that is significant. You see Q4 ended up at 5.5% EBIT margin for Automotive Technologies.
You also might remember that number was 4.6% in Q3. Clearly a recovery from our Q3 performance mainly due to volume impact and scaling effects that offset some, if not most, of the phasing in material price impact. Clearly, if we wouldn't now face completely different and most likely more severe issues with the war in Ukraine, you would have seen something reflected in that performance that is in line with our prognosis that we suspended for obvious reasons. Let's go to the next slide to dive a little bit deeper now into the divisions. First, Automotive Technologies.
I start on the right side this time to see how in the waterfall chart, you see how the margin developed from prior year. As I already said, some of that is due to the fact that we had an extraordinary volume situation for, especially for Q4 with this normally December shutdowns of our automotive customers that didn't happen last year. You see here a gross profit deterioration of 3.9 percentage points. About half of that I would attribute to the material price effect, and the other half is really a lower fixed cost absorption due to the volume impact that I described.
Still, it's a lower volume or lower fixed cost absorption than prior-year quarter. As I also said already, it's a much better volume situation as we have seen in Q3 of 2021. You see then also the effect of the increased R&D expenses that I already described, and therefore I think the 5.5%, our EBIT in Q4 2021, is explainable. Automotive Aftermarket. I start also with the waterfall chart. You see also a significant margin decrease that has similar reasons than in Automotive.
There's still a little gap between our cost impact and price recovery that we obviously try to close as we go deeper into year 2022. The other significant impact reflected here in the gross profit column is a volume and mix impact of around 200 basis points. If you look on the left side, you see that our sales growth mainly happened in the OES sector and not in the independent aftermarket. That normally comes with lower margins and that would be reflected in that gross profit deviation. Last but not least, industrial.
Industrial, you see that first of all all regions have grown, most of them significantly. China a little bit lower in the growth rate. You already heard in the summary slides that and you also see it on the left bottom that wind is one of the drivers for that wind in Greater China. As you all know, we already reported in Q3, the wind demand in China is normalizing after subsidies for offshore windmills is phasing out. However, clearly a growth driver for the way forward.
You also see the aerospace as the only other sector that is significantly decreasing and not growing. That is still due to the impacts in that sector due to the lower travel volumes due to COVID. You see all other sectors are significantly growing and contributing to a strong sales growth of that division. That also then translate on the right side in a very significant profitability improvement.
You see here in gross profit the positive impact that some of that is pricing recovery action and distribution, but most of that is the significantly increased volumes and fixed cost absorption in our production plants. Coming to net income. The first message here, you see there's not a very significant impact on a group level between the reported EBIT and the EBIT before special items. You see in the waterfall chart the further development financial result.
Not spending too much detail here, but that's much improved over prior year, mainly due to a high yield bond that we paid back and had to settle derivatives based on that last year. So that we now see a more normalized level for financial expenses going forward. Income tax is completely in the range of what we expected based on our regional split and nothing to report there. In others, the biggest single item is Schaeffler Paravan Technologie. That is a shareholding of ours that is consolidated at equity.
I'm only mentioning it so explicitly here because I will come back to that point. Hold your thoughts on that one because we have decided going forward to change our accounting in regard to at equity shareholdings. On the bottom right side, you see the detail of the special items. Obviously there's a set-off on a group level for the quarter. Not significant, but there's some, actually not for the quarter, for the full year. Sorry. You see on the right side then that there are some impacts that are minuses and pluses on a divisional level. I would leave it at that.
Maybe just the biggest impacts against the full year 2020. I think I mentioned that already in the Q3 call. We built our restructuring accrual in 2020, and that was here for adjusted EBIT neutralized therefore all the pluses. The other big topic in 2020 was an impairment that we booked in automotive, in the Automotive Technologies division. Net income on the next slide follows completely what I have presented so far. You see on the bottom on the left side that we have achieved EUR 0.22 per share in result for the quarter and for the total year EUR 1.14.
The net income for the total year of EUR 756 million or EUR 748 million after special effects is obviously enabling us to propose the payment of an attractive dividend of 50 cents per common non-voting share. You know that we determine the proposal for the dividend based on a public framework. We want to pay out a dividend in the range of 30%-50% of our group result. The 50 cents would represent 44% of the group result. Therefore, it is solidly in the framework range.
ROSI is with 16%, higher than pre-pandemic levels. That is obviously a very good result. It's also clear that that is somewhat, and you might also remember still the ROSI for the last 12 months in Q3. I said it at that time because of mathematical reason, the numerator and denominator very favorably in the last 12 months for the Q3 results. I said it, I expect it to be a relative peak. You see some of that normalization in our ROSI here. I think it was 16.7% as I reported it in Q3 last time. Normalizing back to 16%.
I don't want to take away anything of the accomplishment. Pretty solid ROCE. If you remember our midterm ambitions, that is clearly above what our midterm ambitions have been with 12%-15%. I would have expected, without the war, a further normalization within that range. Now obviously we have to monitor the situation closely, what this war will bring in economic consequences for all of us, including Schaeffler.
Free cash flow on the next slide is for the quarter characterized by seasonal related personnel cash outflows, most prominently the Christmas bonus mainly in the European and Latin American localities. We have reported already in Q3 and continued tactical increase of inventory offsetting partly the positive normal seasonal impact on accounts receivables. They normally reduce, and they also reduce, but we increased inventories. Which is clear in the KPIs on the left bottom side, clearly had a higher investment activity in the second half of the year, including Q4.
The investment rate, as you see on the left side, is now for the quarter at 1.0, clearly higher than in the other quarters of the year. On the right side, bottom table, as always, you see our free cash flow before M&A and special items. One of the special items that I know you're always interested in, and which are also the biggest numbers there, is restructuring. You see in Q4, we had payouts of EUR 32 million for restructuring. For the full year, it was EUR 308 million, which then would bring the free cash flow for the quarter to EUR 82 million, and for the full year to EUR 830 million.
The underlying cash generation capability of Schaeffler is intact, and I think quite impressive. That leads obviously then as a consequence, as you see here, to a very comfortable situation in regard to leverage ratio. Leverage ratio is below one, and there's no maturities in our financing until March 2024, after we paid back Schuldschein in November of last year. Then also a bond this year on March 1st, actually a very strong liquidity situation. You see it written down here in the box on the bottom right with 25% of the last twelve months sales number.
I think we are in a comfortable situation, a strong balance sheet, strong cash generation, that I think we accomplished in a somewhat challenging environment, and should make us or not very optimistic, but hopeful, that we can weather also some storm going forward. Now, I'm closing with the last slide. It's a little bit technical, but I think it's needed. We adjust our reporting going forward a little bit, so that is now the reconciliation for this reporting going forward of the last year. There's two significant changes. One I already hinted on with the at equity.
Let's start first with the number one here on that slide. All the sales growth numbers for all divisions in the group are slightly changed, as you see in our adjusted numbers. That is due to the fact that we now changed our calculation of the foreign exchange adjustments for technical reasons, for system reasons. We had to go through a budget rate in the past and recalculate everything in a budget rate and then compare the numbers of prior year and current year based on this calculation. Now our system allows us to do it, what I think, correctly.
We use now the actual rates of the prior year to recalculate the actual year and then calculate based on that actual rate calculation the sales growth. Secondly, we decided to account for at equity shareholdings differently than in the past. You saw in one of the waterfall charts that we reported that so far below EBIT, and going forward, we report that as part of the EBIT. The reason is indeed our shareholding in Schaeffler Paravan Technologie.
As you might know, this is an operation that's heavily R&D driven and is completely related to our chassis business and with our reconfiguration and reclassification of our automotive business and making the chassis business really some important cluster that we want to report in future and that we also want to drive significant growth in. We thought that we now also report especially Schaeffler Paravan Technologie, which is a R&D powerhouse, if you will, for our chassis sector within EBIT. That really means, and you see that in our Automotive Technologies division, a deduction of the EBIT margin of around 0.5 percentage points.
I think the best way to look at that is that we increase our R&D efforts especially for chassis by 0.5 percentage points. Please keep that in mind. With that, unfortunately, a little bit technical at the end, I will hand over back to Klaus.
Thank you, Klaus. I will finish now the presentation with the outlook. On page 33, there's nothing that I have not said before. We suspended guidance. I can only stress again, that's the only responsible way to deal with this. You know from the rules when suspension is possible, that we have to come back with a new revision of our decision at the latest by Q1 2021 results that we publish on the tenth of May. My conclusion, the outlook, is on page 34. We can cut that short. I think you heard all the news. We are facing another war-driven crisis.
We need to understand that we will navigate in the next weeks and months to a very dynamic, very unpredictable environment. Our main task is to ensure operating performance and cash generation in this environment. The Schaeffler team is a strong team. In this situation, I think you all should take note that also our main customers, be it on the automotive or on the industrial side, appreciate strong suppliers, people that have their act together and know how to react in this, who have also a view on different sectors. We know what we have to do.
We would have loved that the year continues in a different manner, but we will do what we can to keep Schaeffler on track, and also make sure that we get back on track with our own plans and with generating value. Last page is then on the capital market activities. There are two small roadshows tomorrow, and on Thursday, we'll then progress with our annual general meeting. You have the financial calendar on the right-hand side, and I'm sure that you can have that in your calendars already. With that, I would close from my side and give back to Renata for Q&As. Thank you very much.
Thank you very much, Mr. Rosenfeld and Mr. Bauer. Dear operator, we can open now the Q&A session.
Thank you. Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touch tone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you are using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. First question is from the line of Akshat Kacker from JPMorgan. Please go ahead.
Good afternoon. Thank you. Akshat from JPMorgan. Thank you for the presentation and all the new details in there. I have three questions, please. The first one on automotive technology margins. I know it is a difficult environment, very volatile, and we have possibility of binary outcome in many scenarios, and it probably makes sense not to have a guidance. But can I ask if we can test the resiliency of the business division per se, or if you could do a stress test, what kind of minimum volumes do you need on a global LVP basis to hit your 4%-6% midterm margin target for automotive technology, please? That's the first one. The second one is on the CapEx guidance of up to EUR 900 million. Looking at the current situation, do you have flexibility in CapEx spend in the near term?
I.e., are you well invested in your industrial and automotive businesses for the next few years? Or do you have some catch up on investments from the last two years, probably? The last one is on the reinvestment rate in automotive technology. We know you have a more than 1% reinvestment ratio in E-Mobility and less than 1% in mature businesses. But for the division as a whole, how should we think about reinvestment rates over the next two to three years, please? Thank you.
Well, Akshat, I mean, this, these are all very relevant questions. Again, I have to say, as a reminder upfront, we have not finished our stress testing work. We are in a situation that is unprecedented when it comes to information and expectations. For sure, we are doing several scenarios. When you ask me what's the minimum volume where we would still make 4%-6%, that is a question that I cannot answer with a simple number and say X million is it and below X million is not like this. It depends very much on how this volume unfolds. I do believe that the composition of that volume plays an important role.
I can give you as one indication, the fact that we have strong regions and dedicated regional board members in the region is now a big asset. Our Chinese colleagues start to alert us that they say there are more and more big Chinese customers, you know, I'm not going to mention names, that come to them and say, "We need more investment in the region. We want more volume for our local production." That could be something that helps. We also see something like this in the Americas. My general view is that we will probably see more de-globalization whether we like it or not. That could also to some extent compensate for the setbacks we will have to digest from this overall situation.
Let's leave it here. We are doing our work at the moment. Your question is spot on. Again, I cannot give you a simple volume number that says from this onwards it's four, and from this onwards it's five. There's a drop-through rate that needs to be calculated through the different divisions, and we are on it at the moment. CapEx, I would say, Klaus, there is virtually no catch-up from the past. You can rest assured we have, towards the end of the year, on the one hand, made sure that with all the strong cash flow that we made throughout the year 2021, that we're not sitting on CapEx that then moves into the next year.
I think that's the one explanation. On the other hand, the EUR 900 million is an up-to number. It's a rich number for an environment where we thought it would go in the right direction. There is some significant buffer in that number, and we have already started to ask people for reprioritization. Don't forget, CapEx needs lead time. Most of the bigger projects cannot be invested within six to 12 months. There are some big projects running, but as it looks like, the ramp-up curve is something that gives us significant flexibility on the 900. On the reinvestment rate, also here, if I would now give you a number and say, "This is what I'm expecting for the two or three years," I would contradict my statement that at the moment it is not really predictable.
What I can say is that this new format, the new operating model, gives us a much better handle to see that the business where we wanna grow in the future. I dare to say that I think that e-mobility will rather continue and maybe even further accelerate due to this situation, given oil price and energy transition than in the past. I think this model gives us a much better way to do this systematically, and maybe that leads to, given the size of the business, to even higher reinvestment rates in e-mobility and even lower in engine transmissions. Much for the color, but please understand, I cannot lead through scenarios in this call.
can understand that. Thank you.
You're welcome.
Next question is from the line of Christoph Laskawi from Deutsche Bank. Please go ahead.
Hi, it's Christoph Laskawi, Deutsche. Thank you for taking my questions as well. The first one will be on the supply chains currently for auto and industrial. Could you comment if you are right now still able to source everything you need? And is that more or less running smoothly, and the impact will be more on say, secondary effects which causes production stops at the OEMs? The second question on your open exposure currently to prices like of raw mats which are increasing. Could you just give us a reminder on how long you are currently locked in on steel, energy and other costs?
Last question will be, in the discussions that you currently have with the OEMs, which I believe must be extremely intense, are they giving you any indication on changes in underlying demand that they see? Or is it just that they are focused on working through the order backlog, which should be 3-6 months at least, most of the European ones? Thank you.
Okay. It's a range of questions, and Klaus, you will help me if I forget one. You said this last, Chris. We are in intensive conversations with our big customers. They call us, we call them, and I think the whole industry, at least here in Germany, if not in Europe, has learned from COVID how to work together when something happens that creates a risk for the supply chain. That's. If there's one positive from COVID, then this is one of the things to mention. I can say for sure, we are seeing and you know this from the newspapers, that some of our big customers are stopping production in certain areas.
We at the moment at Schaeffler plants are running. We have seen in the first eight to nine weeks continuous call-offs in some areas even above budget. That is now starting to reduce. How this will unfold is something that we need to see. I don't see a radical stop somewhere where someone says, "We're not going to do anything anymore." That's not the case. Most of the companies that we are talking to have some sort of plans in place how to reroute activities, how to find you know other sources and let the things go forward. You mean you had this famous issue with Kabelbäume, help me with the translation of this. Huh?
Wire harnesses of one of our neighbors here in the region. If you dig into more detail there, you see that this doesn't stop the whole global automotive production. It may have an impact that is in the EUR 80 million range that we have for this year, some sort of a digestible impact, but we don't know what's coming. That's, I think, where the key question mark is. No one can tell you at the moment how long this will last. The best you can do is to stay agile, to stay tuned, to understand what's going on and to react. There's a backlog to be dealt with. The end customer demand is also open. On the one end, we see inflation, cars get more expensive.
You see this in used cars. On the other hand, customers may shy away from doing something. It remains to be seen. In any case, there's a backlog from the last years where, I think, cars are ordered and, that could smoothen it a little bit. In terms of, material, gas supply, and all these kinds of things, I can say we started our task force already before the invasion, on the twenty-fourth. For the Russian exposure, but also for the steel we buy from Russia, we have already found ways to reroute this, through other suppliers, mainly Chinese suppliers. We have, already taken all necessary action, even, again, before the twenty-fourth, to, secure transportation, mostly through ship, instead of road and, rail. To some extent, higher rates for sure.
In terms of energy and gas supply for Schaeffler is until the rest of this year, Klaus secured, in terms of volume and price, by 90%. Also here, we acted quite quickly, already in the middle of February to somehow close that. Let's say if tomorrow this crisis further escalates, what that means, I can't tell you. What I said before, we'll do the best possible to secure that the company can run. What gives me some hope and confidence is that this management team is a proven team that has its act together when it comes into these situations. That may be different if you have completely new people, but Klaus, for example, is a long-standing colleague that I trust 100%.
With him, it works very well to get this done even over weekends.
Very clear. Thank you.
Next question is from the line of Edoardo Spina from HSBC. Please go ahead.
Hello. Thank you for taking my three quick questions. First, I would like to ask about the mid-term view on the restructuring, perhaps as a part of the investments required to move forward. In 2022, I see you mentioned extraordinary expenses, and with the digitalization focus for the mid-term, is this an item that will remain significant for the free cash flow? The second question on the cash flow and the leverage ratio, you provide a range that includes a higher leverage as well. Which half of this ratio you think is more at risk to drive such a potential increase? Do you see opportunities perhaps in the market which are low for the equity market, but is that also an opportunity?
Finally, on the currency, if you can give us a guidance for the, maybe the beginning part of the year, how do you see that impact on your accounts? Thank you.
Edoardo, thank you very much. Your questions were a little bit difficult to understand. If I've not or if we have not understood them correctly, please, jump in and ask them again. Let me start with the last one, and Klaus you can take over. I think your last question was on currency exposure, if I understand this correctly, and how you see
That unfolding. You saw on one of the pages in the backup that we have only given directional guidance. It's obvious that the U.S. dollar gets stronger, the euro gets weaker, and also the Chinese Renminbi gets stronger. That in itself tentatively is positive for us. We were positioned for, you know, rather 1.20 than for parity. There's the Mexican peso that plays an important role, and other currencies may go in the different direction. But if this environment continues, at least I can say, and Klaus, I'm gonna hand over to you to explain a little bit more detail before I take the next question. I think that shouldn't create, at the moment, extra stress, rather a little bit of relief what happens on the FX side.
Maybe, Klaus, you wanna get to that?
I absolutely agree with that. I mean, the obvious question also could be what about the ruble? We obviously have some ruble cash flows. We are ruble long in a normal environment, and all ruble exposure is hedged by 85% over the next 12 months. Obviously also with exchange rates before the invasion. In regard to the dollar and all other currencies, we normally base our planning on what the forward contracts would be if we would completely hedge our cash flows when we start budgeting, let's say, in the middle of the year, and then hedge it on a rolling 12-month basis.
We always have somewhat of an average hedging rate over the 12 months period. There's a little bit of layering in there with different volumes of the layer sizes. We clearly are also hedged for the U.S. dollar. We are not hedged at 1.08 or whatever it is today. We are also not hedged at 1.23 or 1.25. It's somewhere in the middle. I also would completely agree with Klaus that there's no stress or no significant unmanageable stress on that front.
Okay. Let me go to the first question that was, if I understood correctly, Edoardo, the midterm view, what are we going to do? What I can say today, and don't forget this is all days old, we have decided also in our board meeting this morning that we will continue with our strategy. There's no need to turn in circles now or to change direction. We'll stay the course. What is necessary is, and that's what's happening at the moment. All major strategic initiatives, all major strategic projects, all major CapEx projects, all major overhead spend will be revisited, will be reprioritized.
What I can say, and I said it also in the press, this could lead to the fact that initiatives like on the digitalization side will even be speeded up and, you know, executed, implemented more forcefully. I think the digitalization is an area where efficiency gains are possible, also short-term, and maybe that's exactly the right thing now to do. In any case, I can say sustainability, and when I talk about sustainability, this is very much the climate side of it, the whole energy transition, the whole question of what can we offer in alternative energy sources, hydrogen, all of that will clearly, from my point of view, get more emphasis in the future. We'll stay the course in digitalization. We'll stay the course on sustainability and see what that means.
In these days is not the time to talk about opportunities, but I think when the world changes, there are always also situations where you can do and can achieve things that were not possible in the past. Leverage, as far as I understood it correctly, you were asking about how this ratio is gonna develop. I think you know this. This is a company that it has always proven its free cash flow conversion power. 2021 is a good proof for it. We'll continue with our restructuring. Maybe also here we can speed up certain implementation areas. We are in the third phase where for all locations the contracts have been signed.
We've already looked at some of the transfers here in Germany, whether we can possibly accelerate this and speed up. In terms of the leverage ratio, the key aspect here is EBITDA that drives the ratio. We will benefit from, as it's the last 12 months rolling figure, a little bit from the good quarters of the last year. We'll also see what kind of countermeasures we need, and we'll put them in place with adequate priority and vigor.
Perfect. Thank you very much. Maybe just to follow up on the leverage ratio, do you see a potential increase in focus for investment given that the price of assets maybe are lower now for everybody? Is that an opportunity for you? Thank you very much.
Can you say again? You see an increase of what?
Investments, acquisitions.
Acquisitions. Maybe on the acquisition strategy. I mean, you... Sorry, I didn't hear that. You know, we have been, if I may say so, looking backwards, quite lucky that we have not engaged in any significant high volume acquisition that we would now need to refinance or deal with. I think we are also lucky that we've always said we're not going to do anything with carve-outs or splits or putting the whole company at risk because of some undue operations or larger transformational moves. That at the moment is good for us. Our M&A strategy with the more risk-averse approach on smaller bolt-on acquisitions is something that I would not stop.
I would continue to watch and look for clever technological additions if they are available. But you can be rest assured we will be very conscious of our firepower. We'll be very conscious of the risk profile that we have. We're not going to put the company now at risk in this such an environment. It's the nature of the game is risk off, risk down, and making sure that all of this settles somehow, and we can see that we get back on track with our overall strategy.
Thank you very much.
As a reminder, if you'd like to ask a question, please press star followed by one on your touch tone telephone. The next question is from the line of Sanjay Bhagwani from Citi. Please go ahead.
Hi. Thank you very much for taking my question as well. My colleagues have already asked questions on the macros, so I'll have a few on e-mobility and one on commodity prices. My first one is on e-mobility. If you could please provide some split or guidance on the order book, like what portion is from the hybrids versus BEVs. And my second question is on thermal management. I understand that you have reinstated the thermal management now into e-mobility. And there's somewhere around EUR 400 million effect from that in the e-mobility sales. I just wanted to have some more color on like, are these the components actually going into the BEVs, or there's some portion which is for the ICE as well? My final one is on the commodity prices.
If my memory serves well, I think earlier this year, you were mentioning that you may actually move to like more towards like the spot purchasing of the commodities versus hedging and contracts, as you are expecting these steel prices to normalize. If you could provide us some update on that as well, that'll be very helpful.
Okay, let me start with the last one. Claus, you support me if you wanna add something. The main commodity that we need to do our business is steel. You know? I think you all know this. We have outlined it, and Klaus has been very outspoken in the last calls, also at the beginning of the year to explain that situation. At the moment, just assume we would have no war in the Ukraine. I think we are on a good track with a dedicated end-to-end steering by watching what's happening in the market for material prices and how to pass this on to customers. That project is up and running. We are monitoring this on a weekly basis.
We see that our assumptions for the material price are more or less, again, pre-war in the Ukraine, confirmed. We also see that there's good progress week by week in passing on certain price increases to customers, certainly easier in industrial and Automotive Aftermarket than in auto. Also in auto, it is going according to plan. We never said that it's possible to hedge everything 100%. We also never said that it's possible to pass on every price increase to a customer. As it looks, we are on track. Now on top of this, we have the new development, and we need to see what that means in terms of extra stress. That is, as I said before, very difficult to say. I just.
You know, while we're all focused on, rightfully so, on the terrible overall development there in Ukraine, talking to our Chinese colleagues, we've already seen some signs that Chinese steel prices come down a little bit. That could be a good positive thing for us as well. Don't forget, there's a war in Ukraine, but there will still be global division of labor, and there will still be global trade. We should not get completely off track that a significant part of our business is in China and the U.S., and that also in these regions we have our sourcing partners. E-Mobility, you know, sorry I can't say more than tentatively the share of BEV business, also BEV projects is increasing as we speak.
Maybe again, this is only January and February. We had good success in January with some major projects coming in. We'll report about this then in the next quarters to come. There, the two big projects that were coming were both BEV-only projects, so the trend is clearly intact. You will understand that I'm not giving more than that directional statement. In terms of thermal management, you are right. This is a technology and an area of competence that we already developed for ICEs.
What the colleagues have done now, they have asked themselves, "Is it possible to integrate a thermal management module into a 3in1 e-axle?" That's the latest innovation we also presented at the end of the year at the fairs. That would mean that you basically have to split this business. I don't know where the EUR 400 million are coming from. That's something that I cannot confirm at this call without going back to Matthias and his team. In future, we'll see this thermal management, the more e-mobility accelerates as a really interesting feature to generate a Schaeffler competitive advantage through the integration of the 3in1 e-axle. Because it helps us to make the e-axle even more efficient for customers by a clever way to manage heat or manage cooling.
That's I think where it really makes a difference. There is some business from the past, but as we are more and more investing into BEV, that business will also start to run off then together with the ICE business.
Thank you. That's very helpful. Regarding the EUR 400 million, basically I just took out the restated numbers. In 2020 you had reported E-Mobility of EUR 651 million, and then this year the restated number is EUR 1,047 million. That just gives us 400
No, wait. Look, there.
Yeah.
This is something that-
Yeah.
I understand what you did. Thanks for the hint. That's what I assumed, but there are more movements in between.
Mm-hmm.
-than this single one. It's not only thermal management that moved from left to right. There are other changes in the setup.
Yeah. Thank you.
You're welcome.
The last question for today's call is from the line of Stephanie Vincent from JP Morgan. Please go ahead.
Hi, thank you very much for taking my questions and appreciate all the color during this difficult time. The one question I had was just on behavior, because I guess us analysts will probably sharpen our pencils and go back to the 2020 production shutdown during times of stress to sort of stress test all our companies. I guess from your standpoint, what are some of the key differences now between that time and, for example, you know, you did draw down to a small amount under your revolver, ended up recovering very quickly. Would you, after paying down debt over 2021, consider going back to the debt market, either through the revolver route or adding additional cash over this time frame, given the uncertainty?
Well, I think Claus said it. We have a very sort of comfortable liquidity position with 25% of our sales being available in liquidity, be it cash on the balance sheet or undrawn facilities. I don't see any need to change anything there. In the past, we always thought maybe we need to put money differently at work, but I have no concerns at the moment on the financing side. We will stay the course with that. If I remember the days in 2009 when I joined here as CFO, we were always looking at 10% of sales as a decent number, and now we have 25%.
Even if this situation may not be comparable to the crisis, the Lehman crisis and whatever we had there, I don't think there's any need to do anything at that front. The balance sheet is robust. The company knows what to do and we'll monitor it. I don't see any negotiations or discussions with banks necessary to optimize what we have.
That's great. Thank you.
Good. Ladies and gentlemen, let me close the call. It was a pleasure that you joined us. Very unfortunate and tragic times. You all share that. We appreciate that you are interested in our situation, and we are there for all your calls and questions. Talk to Renata and the team and Claus and myself. We'll make ourselves available. For us, the most important thing is that this war stops and that we somehow get back to normal times. With that, thank you very much for listening and all the best to you personally and your families. Bye-bye.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for joining and have a pleasant day. Goodbye.