FRANKFURT, June 27 (Reuters) - Shares in Schaeffler dropped 10 percent in pre-market trade on Tuesday, according to a trader at brokerage Lang & Schwarz, after the German auto parts supplier slashed its profit guidance on growing price pressures and high costs.
The group said it now expected its adjusted 2017 operating profit (EBIT) margin to be 11 to 12 percent, compared with previous guidance for 12 to 13 percent.
Earnings in the second quarter, which ends on Friday, were substantially lower than a year earlier due to rising pricing pressures in the automotive business, growing costs for new product launches and higher research and development costs for electric car technology, Schaeffler said.
It added that it had suffered a temporary supply chain shortage in the automotive aftermarket business, without providing details.
It cut its forecast for free cash flow for 2017 to around 500 million euros from about 600 million, but stuck with an aim for 4 to 5 percent revenue growth excluding currency effects.
Schaeffler Chief Executive Klaus Rosenfeld warned earlier this year it would be difficult to sustain strong margins in automotive operations given rising steel prices, high R&D costs and growing competition.
Schaeffler said it now expected to report a slide in its first-half margin to around 11 percent from 12.8 percent a year earlier. It said it would publish key figures for the first six months of the year by mid July. (Reporting by Maria Sheahan; Editing by Mark Potter)