Third Quarter: Slight Recovery as Highly Volatile Market Environment Continues

• Consolidated sales of €10.3 billion (Q3 2019: €11.1 billion)
• Adjusted EBIT of €832 million (Q3 2019: €612 million); adjusted EBIT margin of 8.1 percent (Q3 2019: 5.6 percent)
• EBIT of -€673 million in third quarter (Q3 2019: -€1,971 million) and net income of ​​​​​​​-€719 million, resulting from impairments and expenses as already announced (Q3 2019: -€1,986 million)
• Free cash flow before acquisitions and carve-out effects: €1.8 billion  (Q3 2019: €343 million)
• CEO Dr. Elmar Degenhart: “From an operational standpoint, we did remarkably well in the third quarter. We are confident that, for the year as a whole, we will achieve a positive free cash flow before acquisitions and carve-out effects.”
• Outlook for fiscal 2020: consolidated sales of about €37.5 billion; adjusted EBIT margin of about 3 percent; positive free cash flow before acquisitions and carve-out effects
• Multi-billion-euro volume orders for future technologies such as integrated brake systems and high-voltage box for electric vehicles

Hanover, November 11, 2020. In a continuing highly volatile market environment, Continental achieved overall solid quarterly results in the third quarter of 2020. As was expected, from an operational standpoint, the quarter developed better than the historically weak second quarter of 2020. Consolidated sales in the third quarter amounted to €10.3 billion (Q3 2019: €11.1 billion). Before changes in the scope of consolidation and exchange-rate effects, sales were down 2.7 percent compared to the same period of 2019. In the second quarter of 2020, they were down by as much as 40 percent. The adjusted operating result (adjusted EBIT) in the third quarter rose to €832 million compared to the previous year (Q3 2019: €612 million), corresponding to an adjusted EBIT margin of 8.1 percent (Q3 2019: 5.6 percent).

“We did remarkably well in the third quarter from an operational standpoint. The measures we undertook as soon as the coronavirus pandemic broke out were fully effective. We thus did not hesitate to hit the brakes immediately. In China and North America, we were just as resolute in accelerating again when the markets started to recover. Our enhanced agility and our disciplined cost management make us more competitive worldwide. In a persistently tough market environment, we are thus demonstrating a more-than-satisfactory performance on which we can build. It gives us reason to look to the future with optimism, yet with a certain degree of caution. We are confident that, for the year as a whole, we will achieve a positive free cash flow before acquisitions and carve-out effects,” said Continental CEO Dr. Elmar Degenhart, when announcing the quarterly figures on Wednesday in Hanover.

He added: “The current development should not, however, fool us into thinking that the global automotive markets will recover quickly. They are still in the midst of a fundamental technological transformation. And with the number of coronavirus cases on the rise once again, the markets continue to be unpredictable. The overall critical situation clearly confirms that, above all, resolute and flexible action is needed to safeguard our competitiveness and viability. That is the goal of our structural program as well as our realignment and strategy. With the decisions made recently by the Executive Board and Supervisory Board, we have passed a key milestone and are now increasingly looking ahead to our profitable growth with future technologies.”

As explained in the mandatory disclosure issued on October 21, 2020, the market assumptions made and adapted as part of the annual planning process led to the recognition of non-cash impairments of goodwill totaling €649 million in the Vehicle Networking and Information business area in the third quarter of 2020. The largest portion of the impairments was attributable to acquisitions made before fiscal 2008. The expected impact of restructuring measures was also taken into account in the planning process.

Additionally, in the third quarter of 2020 there were restructuring expenses and impairments on property, plant and equipment totaling €687 million, which were incurred as part of the expanded Transformation 2019–2029 structural program. For the fourth quarter, further restructuring expenses and impairments of an undetermined amount on property, plant and equipment are expected in conjunction with this program.

These impairments and restructuring expenses led to a negative reported EBIT in the third quarter of 2020, as is also the case for the net income attributable to the shareholders of the parent. The operating result (EBIT) in the third quarter of 2020 amounted to -€673 million (Q3 2019: -€1,971 million), corresponding to an EBIT margin of -6.5 percent (Q3 2019: -17.7 percent). Net income totaled -€719 million (Q3 2019: -€1,986 million).

In the third quarter of 2020, free cash flow before acquisitions and carve-out effects amounted to €1.8 billion (Q3 2019: €343 million). In the second quarter of 2020, it was negative, at -€1.8 billion. “As expected, the negative working-capital effects from the second quarter were neutralized with the stabilization of the business trend in the third quarter,” explained Continental CFO Wolfgang Schäfer.

As at the end of the third quarter of 2020, Continental had more than 233,000 employees. representing a decline of more than 7,700 in comparison to the end of 2019. The reasons for the decrease are low production volumes due to the coronavirus pandemic, improvements in efficiency, and measures taken as part of the structural program.

Please finde here an overview of all available materials relating to the publication nine months 2020 results.