From April to June, Continental achieved group-wide sales of 9.9 billion euros and exceeded the result of the previous year (6.6 billion euros) by nearly 50 per cent. After the adjusted operating result (-635 million euros) and the EBIT margin (-9.8 per cent) had still been in the negative area in the year before, the people from Hanover were able to move forward there too: Adjusted EBIT was at 711 million euros, the EBIT margin at 7.2 per cent. As a consequence, the DAX company achieved a net result of 545 million euros, whereas there was still a minus of 741 million in the second quarter of 2020. “After the historically weak period in the previous year, we were able to get a respectable result in the last quarter“, explained Wolfgang Schäfer, Chief Finance Officer at Continental.
Positive development in the Tires group sector
The Automotive Technologies group sector increased its sales by 47.8 per cent to 3.8 billion euros in the second quarter and the EBIT margin (-1.6 per cent) also improved compared to the previous year (-19 per cent). The deterioration of supplies with semi-conductors, which was also responsible for lower sales figures and higher transport costs, had a huge impact on sales and the overall result. “The negative impact of the chip shortage has been highly noticeable. At the same time, big orders for key technologies like for example extensive vehicle displays, illustrate the growing demand for digitalized technologies“, said Nikolai Setzer, Chief Executive Officer at Continental.
The Rubber Technologies group sector generated sales of 4.3 billion euros (+46.9 per cent) with an EBIT margin of 14.6 per cent (previous year: 1.2 per cent) According to company information, the Tires group sector, which benefited from a globally strong truck and passenger car replacement business, did extremely well. “In the second quarter, the Rubber Technologies group sector was able to continue with the performance of the first three months of the business year. In spite of growing headwind due to increasing raw material prices, we were able to finish with a strong first half of the year”, reported Setzer.
Furthermore, the company informed that automotive markets were regionally developing quite differently in the period from April to June 2021. Preliminary figures expected 18.8 million vehicles for the second quarter, which was a considerable decline of 8.9 per cent compared to the first three months of the year. Due to severe supply shortages of semi-conductors, the production numbers decreased even more in North America (-11.5 per cent; 3.2 million units) and in Europe (-12.0 per cent; 4.1 million units). Only the Chinese automotive production turned out to be robust and achieved with 5.8 million units (+0.1 per cent) nearly the same result as in the previous quarter.
Market outlook and forecast
In the months to come, people responsible for Continental expect a continuously high volatility, as the shortage of semi-conductors will tremendously affect automotive production. “The shortage of semi-conductors as well as rising raw material prices will have a considerably negative impact on automotive production”, forecasted Setzer. After producing 74.6 million passenger cars and light commercial vehicles last year, Continental expects an increase of between 8 and 10 per cent (previously 9 to 12 per cent).
Continental is adjusting its outlook for continuing operations, thus excluding Vitesco Technologies. Continental expects sales of about 33.5 to 34.5 billion euros (previously 32.5 to 34.5 billion euros) and an adjusted EBIT margin of 6.5 to 7 per cent (previously 6 to 7 per cent).
For the Automotive Technologies group sector, Continental expects sales of 16 to 16.5 billion euros (previously 16 to 17 billion euros) and an adjusted EBIT margin in the range of around 0.5 to 1 per cent (previously 1 to 2 per cent). This includes higher costs for extra freights of around 200 million euros as well as additional research and development expenses in the growth field of assisted and automated driving of around 150 to 200 million euros. According to the technology company, the updated forecast for the adjusted EBIT margin resulted primarily from accounting-related one-off effects from the planned spin-off of Vitesco Technologies of about 80 million euros. Although these impacted the adjusted margin of the Automotive Technologies group sector, it would not have any effect on the group result.
Sales in the Rubber Technologies group sector are now expected to be between 17.2 and 17.8 billion euros (previously 16.5 to 17.5 billion euros) with an adjusted EBIT margin of around 12.5 to 13 per cent (previously 11.5 to 12.5 per cent). This includes the impact expected from higher raw material costs of around 500 million euros (previously 350 million euros). These were mainly caused by synthetic and natural rubber, announced Continental.
