The car supplier and tire manufacturer Continental After significant improvements in the past year, the company is once again doing more to address the weakening automotive supply sector. The savings program that has been initiated with job cuts in the division should provide tailwind as well as higher sales prices and improvements in efficiency. For the first time since 2019, the Hanoverians were in the black in this area last year. Conti boss Nikolai Setzer (52) was able to present a jump in profits for the entire group on Thursday. The Conti share still fell.
The paper lost 2.4 percent to 71.08 euros in the afternoon. There has been a decline of 7.6 percent since the beginning of the year. JPMorgan analyst Jose Asumendi spoke of strong results and a positive outlook. However, high special expenses weighed on the prospects for free cash flow. However, George Galliers from Goldman Sachs described the fourth quarter performance in auto supply as disappointing. Stifel expert Alexander Wahl assumes that market estimates for the operating profit of the entire group will fall.
Auto supply business turns a profit for the first time since 2019
Last year things went better in the automotive supply division than the year before, also because the still difficult supply situation for electronic chips eased and there were fewer special freights. In a business that has been in crisis for a long time, it has Management has put the red pencil on, thousands of jobs are being cut
. Around 7,150 positions are available, including 5,400 in administration. By 2025, the division’s annual costs should fall by 400 million euros, according to division boss Philipp von Hirschheydt. On top of that, there are job cuts in research and development.
Last year, thanks to a final spurt, 1.9 percent of sales in the automotive supply business remained as operating profit before special items as well as interest and taxes. The group had set itself a target of around 2 to 3 percent. CEO Setzer said in a conference call with analysts, in the large market China The group is still underrepresented among up-and-coming domestic car manufacturers. These are currently growing strongly, especially in the electric car sector, and are taking market share away from established manufacturers such as German companies.
More profitability aimed at in the car business
According to CFO Katja Garcia Vila (52), things were already looking better for orders from China in 2023. “In our current order intake in China, we are seeing a growing proportion of Chinese manufacturers,” she said in an interview with the news agencies dpa-AFX and dpa. “We will therefore certainly be a sought-after partner if certain players become more involved in production capacities in other regions of the world in the future.”
For the current year, Conti is aiming to further improve profitability in the car business. The operating profit margin is expected to increase to between around 3.0 and 4.0 percent this year. Analysts had previously expected a value at the lower end of the range.
Jump in profits across the entire group
Conti’s tire division once again provided the lion’s share of profits for the entire group. The DAX group was able to record a jump in net profit to 1.16 billion euros. A year earlier it was just under 67 million euros.
The dividend is expected to increase by 70 cents to 2.20 euros. That’s a total of around 440 million euros. The majority of it goes to the industrial family Schaeffler, which holds 46 percent of the shares through its holdings.
Sales climbed by 5.1 percent to 41.4 billion euros. The operating result increased by almost a third to 2.52 billion euros. That corresponded to a margin of 6.1 percent. In the new year, boss Setzer is aiming for a figure of 6.0 to 7.0 percent. As in previous years, management expects costs to rise; this time around 500 million euros in costs are likely to be incurred for higher wages and salaries compared to the previous year. Around half of this falls on the automotive supply sector.
Based on the exchange rates at the beginning of the year, total sales are expected to be between 41.0 and 44.0 billion euros. “In 2024 we will tackle it actively again and persistently pursue our annual goals,” said Setzer, according to the statement. The people of Lower Saxony do not expect any tailwind from increasing global production of cars and light commercial vehicles.
With the cash inflow adjusted for takeovers and division sales (free cash flow), CFO Garcia Vila estimates a value of 0.7 to 1.1 billion. Despite the better estimated profit development, this is less than the 1.3 billion euros from the previous year.
However, the manager referred to high special expenses of around one billion euros. According to the information, these result on the one hand from the buyback of company shares from a Conti pension fund. In addition, Conti is separating out certain business areas from the plastics technology and automotive supply divisions that are being put to the test. Money is also likely to flow out for the restructuring of the company.