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      October 17, 2016

      Continental Changes Outlook for Fiscal 2016

      EBIT of the Automotive Group is expected to be significantly lower than the previous year’s level.

      • Potential expenditure for warranties and pending antitrust proceedings and
      • the aftermath of three earthquakes in Japan as well as high R&D advances

      will have a negative impact on Automotive Group’s reported and adjusted EBIT for fiscal 2016 of around €480 million and on the corporation’s outlook, which was last changed on August 3, 2016.

      Hanover – Over the past few days, several isolated circumstances have resulted in the following situation:

      The Chassis & Safety and Interior divisions are anticipating a negative impact of around €390 million due to warranties for products, the majority of which were supplied between 2004 and 2010, and due to  potential expenditures for pending antitrust proceedings.

      The situation of one of our microcontroller suppliers has become even worse due to the latest earthquake on August 31, 2016, in the Kumamoto region of Japan. As a result, the Interior division is anticipating a loss in sales in the current year amounting to at least €100 million (previously expected: €50 million). EBIT will be impacted by around €50 million due to special cargos, product adjustments and increased manufacturing costs.

      R&D advances which are higher than expected further impacted the Interior and Powertrain divisions by roughly an additional €60 million. Consequently, the adjusted EBIT margin of the Powertrain division in 2016 will be below the previous year’s level of 5.7 percent.

      These burdens can only be partially absorbed. In aggregate, these circumstances result in a negative effect on the Automotive Group’s reported and adjusted EBIT of around €480 million.

      Effects on the outlook for the corporation, which was previously amended on August 3, are as follows:

      • Despite the situation in Japan, the sales forecast for the corporation is still confirmed at around €41 billion before exchange-rate effects
      • The adjusted EBIT margin for the corporation will be over 10.5 percent in the current year (previously over 11 percent)
      • The sales forecast for the Automotive Group is confirmed at around €25 billion before exchange-rate effects
      • The outlook for the adjusted EBIT margin of the Automotive Group has been lowered to over 6.5 percent (previously over 8.5 percent)The outlook for the adjusted EBIT margin of the Automotive Group has been lowered to over 6.5 percent (previously over 8.5 percent)
      • The outlook for the Rubber Group (sales over €16 billion before exchange-rate effects and adjusted EBIT margin over 17 percent) is confirmed
      • All remaining elements of the outlook (negative special effects amounting to around €100 million, negative net interest result better than €250 million, corporation tax rate below 30%, capital expenditure ratio before financial investments at around 6% of sales, and free cash flow before acquisitions of at least €2 billion) are confirmed.
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