FRANKFURT, July 30 (Reuters) – German auto supplier ZF on Monday said its first-half operating profit margin narrowed due to currency headwinds and higher steel and aluminium prices, as a global trade war weighed on earnings. ZF said earnings before interest and taxes (EBIT) fell to 1.06 billion euros ($1.24 billion), down from 1.2 billion a year earlier, citing higher raw material prices, currency effects and high research and development  spending. As a result, the Friedrichshafen-based company’s EBIT margin fell to 5.7 percent, from 6.6 percent a year earlier. “Even if conditions become somewhat rougher in the second half of the year – especially due to impairments of free trade – we are sticking to our forecast,” Chief Financial Officer Konstantin Sauer, explained in a statement.

For the full year, ZF expects sales of 36.5 billion euros, an EBIT margin of 6 percent and a free cash flow of at least 1 billion euros. As part of an ongoing trade dispute, the United States last week agreed to suspend hostilities over tariffs with Europe in a fragile deal that may clear the way for renewed pressure on China. ZF is looking for ways to expand its software and autonomous driving expertise, including through acquisitions. The company will seek new business with start-up auto makers including Deutsche Post’s Streetscooter and E.Go, maintaining its role as a supplier of components and systems, rather than taking the lead in developing a vehicle, it said. ZF ruled out making another bid for Swedish brake systems maker Haldex at the current time, and said it continues to review “all options” for its 17 percent Haldex stake. ZF further said it has no plans to enter the field of electric car battery production.