The automotive supplier Continental has somewhat dampened its business outlook for the current year due to weaker replacement tire business. CEO Niko Setzer (52) is assuming that the range for the sales target will be around half a billion euros less than before because the replacement tire markets in North America and Europe are currently shrinking, as the Hanoverians said on Wednesday. On the other hand, Conti now expects slightly better car production in the world than before — and with fewer headwinds from higher costs. The Conti share rose slightly in the Dax.
The paper gained 1.7 percent in the morning to 71.04 euros. The price has been hovering around the EUR 70 mark for some time, with the high for the year coming from March at a good EUR 79. Since the beginning of the year, the share has gained a good quarter. In the long term, however, the trend is negative – in June 2021 the share certificate was still worth over 118 euros, in 2018 at the record high even well over 200 euros. Analyst Himanschu Agarwal from the US investment bank Jefferies does not expect the lowered sales outlook to have any significant effects on market expectations, as he wrote in an assessment.
“The result of Automotive fell short of expectations”
The Conti management is now planning a total turnover of between 41.5 and 44.5 billion euros for the year. So far, the goal has been 42 to 45 billion euros. The forecast for the operating profit margin before interest and taxes remains untouched. Conti had already presented key data about a month ago, confirming the targets for the ailing automotive supplier division, which had surprisingly slipped back into the red in the second quarter due to currency effects and expensive special freight.
“The result of Automotive fell short of expectations, we have to catch up here in the second half of the year,” said boss Setzer according to the announcement. The management sees an improvement in the unstable division, which has often made operational losses in the recent past. On the one hand, the group has initiated another round of price negotiations with customers, which should have a positive impact – the first positive deals were made in July.
Dependence on the production figures of the car manufacturers
On the other hand, Conti assumes that the overall market for the production of passenger cars and light commercial vehicles will develop slightly better than before. Three to five percent more cars are to be manufactured worldwide than last year, instead of only two to four percent.
With many businesses, Conti depends directly on the production figures of the car manufacturers, because the more they produce, the more parts they call off from Conti. In the second quarter, car production increased by 16 percent to almost 22 million vehicles worldwide, with the largest increase being in the world’s largest car market China.
In addition to the short-term improvements, Conti received 8.6 billion euros in orders for the electronics, software, security and interior business in the quarter. High orders resulted in particular from the partnership with the US start-up Aurora announced in April. Conti received orders worth around 4.8 billion euros for the jointly offered autonomous truck systems, which are to be launched on the American market from 2027. Conti supplies the hardware and additional software for the systems.
CFO Katja Dürrfeld is optimistic
With the accruing additional costs, the environment for Conti is slowly brightening up a bit. The company is now no longer assuming additional costs of 1.7 billion euros for salaries, materials, energy and logistics compared to the previous year, but only 1.4 billion. In the tire division, the prospects improved by around 200 million euros, in the area of plastics technology (Contitech) by around 100 million.
In an interview with the financial news agency dpa-AFX, Conti’s chief financial officer, Katja Dürrfeld, did not want to give an outlook as to when, for example, falling commodity prices could become a tailwind. However, the company has already seen falling raw material prices in the tire sector in recent months.
The manager is confident that the planned improvements in the operating result for the second half of the year and better management of the operating capital will still bring about the turn to a positive cash inflow (free cash flow) within the targeted framework.
Sales climbed to 10.4 billion euros in the second quarter
After six months, an outflow of 964 million euros, adjusted for takeover effects, is recorded. Calculated are plus 0.8 to 1.2 billion euros for the year. Investors pay more attention to the indicator because it can provide information about the scope for paying the dividend.
Revenue climbed 10.4 percent year-on-year to EUR 10.4 billion in the second quarter. Conti was able to increase earnings before interest and taxes adjusted for special effects by almost a quarter to 497 million euros. The bottom line was a net profit of 209 million euros after the group had made a loss of 251 million euros a year earlier. At the same time he struck Sale of the Russian tire plant in Kaluga with a total of almost 80 million euros.
more on the subject
Also off the Russia– Conti continues to knit business in the portfolio. In July, the company announced that it would gradually phase out activities at the Gifhorn plant in Lower Saxony by the end of 2027. In the meantime, Conti is in talks with the heating engineer Stiebel Eltron, who is planning to build heat pump parts in Gifhorn.