Last year, we frequently reported about Continental’s realigned strategy in detail. The group had set its course for the future – and was again able to perform well in a continuously turbulent market environment in 2021. According to people responsible for the company, coronavirus pandemic, low automotive production due to shortages of electronic component as well as considerable cost increases in the areas of procurement and logistics had a huge impact on sales and earnings of the DAX-listed company. Nonetheless, the management confirmed that the company achieved its adjusted annual targets.
“The past fiscal year was again very demanding for us. Despite the many challenges, we performed well operationally in 2021 and achieved a positive net income,” said Nikolai Setzer, CEO of Continental, at the virtual annual press conference. Setzer highlighted the company’s strong technology position: “Safe, autonomous, connected and sustainable driving provide the new horsepower for the mobility of the future. We are committed to developing these areas. This is where our strength lies – from brake systems, vehicle surroundings sensors, high-performance computers, and sustainable tyres, through to hoses for the thermal management of electric vehicles. We are well positioned thanks to our focused portfolio and our comprehensive software and digitalization expertise.”
According to preliminary figures, the DAX company’s consolidated sales totalled €33.8 billion in the past fiscal year (2020: €31.9 billion, +6.0 per cent). Unless indicated otherwise, the people responsible for the company stressed that the respective effects of Vitesco Technologies until the spin-off in September 2021 were not taken into account. After adjusting changes in the scope of consolidation and exchange rate effects, sales rose by 7.4 per cent. In a continuously demanding market environment, the company achieved an adjusted EBIT of €1.9 billion (2020: €1.4 billion, +37.7 per cent), corresponding to an adjusted EBIT margin of 5.6 per cent (2020: 4.4 per cent).
War in Ukraine has caused uncertainties
The Tires group sector was a stability factor. “While the low production level worldwide had a negative impact, particularly on our automotive business, our Tires and ContiTech group sectors achieved a good result in spite of massive cost increases in the areas of procurement and logistics,” said Setzer. Following a negative net income in the previous year, which resulted from incurred expenses and impairments on property, plant and equipment, Continental achieved a net income of €1.5 billion in 2021 (2020: -€962 million). “Based on our net income and our stable cash flow situation, we are proposing a dividend of €2.20 per share to the Annual Shareholders’ Meeting, in line with our dividend policy,” said Katja Dürrfeld, CFO of Continental. Continental’s dividend policy provides for a distribution of between 15 and 30 per cent of net income.
The current war situation in Ukraine has been worrying the management. Should the geopolitical situation remain tense or even worsen, it could result in lasting consequences for production, supply chains and demand. Depending on the extent of the disruption, this might result in lower sales and earnings in all group sectors as well as for the Continental Group compared to the prior year. Based on the assumptions regarding the trends in relevant markets and industries for 2022, Continental anticipated consolidated sales of around €38 billion to €40 billion and an adjusted EBIT margin of around 5.5 to 6.5 per cent. For the Automotive group sector, Continental anticipated sales of around €18 billion to €19 billion with an adjusted EBIT margin of around 0 to 1.5 per cent. For the Tires group sector, Continental expected sales of between around €13.3 billion and €13.8 billion with an adjusted EBIT margin ranging between 13.5 and 14.5 per cent. For the ContiTech group sector, Continental anticipated sales of between around €6.0 billion and €6.3 billion with an adjusted EBIT margin ranging between 7.0 and 8.0 per cent.
Sustainability as central element
The Hanoverian goals are very ambitious and the management increased pressure in spite of the tense situation. An increase in profitability has still top priority. “We are in the midst of a fundamental transformation. We want to emerge from it as winners. We are not satisfied with our current financial performance. Accordingly, we will rigorously implement our strategy and increase our profitability. We, therefore, firmly stand by the medium-term targets that we published at the end of 2020,” said Katja Dürrfeld, the determined CFO of Continental. Among other things, Continental will aim at an adjusted EBIT margin of between 8 and 11 per cent in the medium term.
Sustainability is to be a central element of the company’s philosophy. By 2040, all of its production processes are to be made carbon neutral. The Conti management aims to be 100% carbon neutral across its entire business by 2050 at the latest. The Hanoverian company presents its Conti GreenConcept from the tyre business as an example of future-oriented products. According to company information, more than half of the concept tire is made from renewable or recycled materials such as natural rubber from dandelions, silicate from the ashes of rice husks, and vegetable oils and resins. Furthermore, the materials Continental uses in the tyre casing also include polyester from recycled plastic bottles for the first time ever. The group is also well positioned in the area of electromobility. We have been reporting extensively.
