In the Automotive group sector, the German major’s sales increased by 1.8 percent to Euro 5.0 billion while global production of passenger cars and light commercial vehicles amounted to around 22.3 million units in the third quarter of 2023.
09 Nov 2023 | 2007 Views | By Autocar Professional Bureau
German Tier-1 major Continental ended the third quarter of 2023 in line with its expectations. The technology company significantly improved the operating result in its Automotive group sector compared with H1 of CY2023. This performance is attributed to price adjustments, high cost discipline, and stabilised supply chains. Furthermore, it increased ...
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German Tier-1 major Continental ended the third quarter of 2023 in line with its expectations. The technology company significantly improved the operating result in its Automotive group sector compared with H1 of CY2023. This performance is attributed to price adjustments, high cost discipline, and stabilised supply chains. Furthermore, it increased its adjusted free cash flow year-on-year as well as compared with the first two quarters of 2023.
This was primarily due to a reduction in inventories. The company has also adjusted its sales outlook for the Automotive group sector – mainly because of ongoing negative exchange-rate effects – and its outlook for consolidated sales. It has also slightly raised its adjusted EBIT margin outlook for Tires due to the group sector’s good earnings.
“We ended Q3 CY2023 in line with our expectations. Our earnings were good in Tires and stable in ContiTech, and we made progress in Automotive, significantly increasing our earnings compared with the first half of the year. We will build on this in the fourth quarter and continue to improve,” said Continental CEO Nikolai Setzer in Hanover, Germany on Wednesday.
In Q3 of CY2023, Continental achieved consolidated sales of Euro 10.2 billion (Q3 2022: Euro 10.4 billion / -1.5%). Its adjusted operating result was Euro 637 million (Q3 2022: Euro 595 million / +7.1%), corresponding to an adjusted EBIT margin of 6.2 percent (Q3 2022: 5.7 percent).
Net income in the third quarter increased to Euro 299 million (Q3 2022: Euro -211 million). Adjusted free cash flow was Euro 466 million (Q3 2022: Euro -496 million).
“We have also made progress in terms of adjusted free cash flow. But, as in the previous year, we still have significant ground to gain in the fourth quarter. Our focus is on increasing our earnings and further reducing inventories and receivables to achieve an adjusted free cash flow of around Euro 0.8 billion to Euro 1.2 billion by the end of the year,” said Continental CFO Katja Garcia Vila.
Flat automotive production in Q3 CY2023
According to preliminary figures, the global production of passenger cars and light commercial vehicles amounted to around 22.3 million units in the third quarter of 2023. This was around the same level as the previous quarter (Q2 2023: 22.2 million units) and around 4 percent higher year-on-year (Q3 2022: 21.5 million units).
Market outlook and forecast for FY2023
For 2023, Continental expects production of passenger cars and light commercial vehicles to increase by 5 to 7 percent year-on-year (previously: 3 to 5 percent). For the global tire-replacement business, the technology company expects sales volumes to develop by -2 to 0 percent.
Continental has adjusted its sales outlook for the Automotive group sector, mainly because of ongoing negative exchange-rate effects. Continental now expects sales in the Automotive group sector of around Euro 20.0 billion to Euro 21.0 billion (previously: Euro 20.5 billion to Euro 21.5 billion) and consolidated sales of around Euro 41.0 billion to Euro 43.0 billion (previously: Euro 41.5 billion to Euro 44.5 billion).
Furthermore, the Tires group sector performed well, despite declining European and North American markets in the tire-replacement business. Continental has therefore slightly raised its adjusted EBIT margin outlook for this group sector. For Tires, it now expects an adjusted EBIT margin of around 12.5 to 13.5 percent (previously: 12 to 13 percent).
Automotive group registers earnings growth
In the Automotive group sector, sales increased by 1.8 percent to Euro 5.0 billion (Q3 2022: Euro 4.9 billion). With its sales growing organically by 5.1 percent before exchange-rate effects and changes in the scope of consolidation, and global automotive production rising by around 4 percent, the group sector slightly outperformed the market. Automotive significantly increased its adjusted EBIT margin compared with the first two quarters of the year to 2.8 percent (Q3 2022: 2.5 percent).
The improvement in earnings resulted from the price adjustments made in response to inflation-related additional costs of around Euro 1 billion for 2023 in the Automotive group sector alone. High-cost discipline and stabilised supply chains also had a positive impact on earnings.
Continental Tires wins sustainability award
The Tires group sector reported a good quarter. Due to declining volumes in the tire-replacement business, sales in Tires were down year-on-year at Euro 3.4 billion (Q3 2022: Euro 3.6 billion, -5.4 percent). At the same time, Tires was able to improve its earnings position by increasing its adjusted EBIT margin to 13.2 percent (Q3 2022: 11.8 percent). The higher margin resulted primarily from the continued high share of premium tires as well as lower raw material costs.
Continental also won another sustainability award. Its UltraContact NXT – the most sustainable production tire currently on the market – was the winner in the “sustainable development/environment” category at the Swiss Automotive Show in August 2023. Comprising up to 65 percent renewable, recycled and mass balance-certified materials, the new summer tire from Continental combines a particularly high share of sustainable materials with maximum safety and performance. This is also demonstrated by the fact that the tire has been awarded the highest possible rating (“A”) of the EU tire label in terms of rolling resistance, wet braking, and exterior noise. The tire has been available to buy since July 2023.
New ContiTech hydrogen technology centre
The ContiTech group sector recorded another stable quarter, posting sales of Euro 1.7 billion (Q3 2022: Euro 1.7 billion, -1.0 percent) and an adjusted EBIT margin that was up slightly year-on-year at 6.6 percent (Q3 2022: 6.3 percent). This is particularly attributed to inflation-related price adjustments.
Continental also opened a new TechCenter for hydrogen technologies at its location in Hamburg-Harburg. ContiTech will use this center mainly as a collaborative platform for sharing knowledge internally within the company and externally with universities and other companies, for example. Innovations and the transfer of existing technical solutions to new applications in hydrogen technology will also be promoted.