March 20, 2012 / 11:04 AM / 6 years ago

UPDATE 1-Schaeffler struggling to cut debt

* Net debt jumps 1.34 bln during year to 7.08 bln euros

* Pays 2.36 bln euros dividend to parent (Adds details)

FRANKFURT, March 20 (Reuters) - Indebted German auto parts supplier Schaeffler forecast a slight decline in profitability and said it would not burn cash this year as it struggled to make a dent in its growing debt pile.

The balance sheet deteriorated significantly as loss-absorbing equity capital plunged over the course of the year thanks to a 2.36 billion euros ($3.1 billion) dividend paid in cash and in kind to its parent, a holding company owned by Georg Schaeffler and his mother.

The ratio of equity to overall assets fell over 10 percentage points to just 13.2 percent at the end of the year.

Net debt surged to 7.09 billion euros at the end of December versus 5.74 billion.

Free cash flow - excess liquidity after investments that can be used to fund dividend payments and pay off debt - nearly halved to 319 million euros due to higher investment needs and high interest payments.

“We are anticipating particularly North America, but also China, India, and Russia providing impetus for growth. Based on these forecasts, we are currently aiming for sales growth of more than 5 percent and an EBIT margin of more than 13 percent in 2012,” Chief Executive Juergen Geissinger said in a statement on Tuesday.

The company’s operating margin stood at 15.8 percent last year. ($1 = 0.7552 euros) (Reporting by Christiaan Hetzner)

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