- Outlook adjustment due in particular to the further decline in vehicle production
- Expected adjusted EBIT margin for 2019 now around 7 to 7.5 percent (previously: around 8 to 9 percent)
- Sales forecast for 2019 at around €44 to €45 billion (previously: around €45 to €47 billion)
- Solid second quarter despite weak market: sales around €11.2 billion, adjusted EBIT margin around 7.8 percent
Hanover, July 22, 2019. The technology company Continental has adjusted its outlook for fiscal 2019. The main reason is the continued decline in the global production of passenger cars and light vehicles. Continental had previously expected global automobile production for 2019 to be at the same level as the previous year. According to the latest developments in global automobile production, the Dax company now expects a decline of around 5 percent for the full year. Furthermore, there are indications of unexpected changes in customer demand as well as potential warranty claims in the Automotive Group in the second half of the year. The causes of these potential warranty costs and the corresponding amounts are not clarified at this point in time. The sales forecast adjusted for the aforementioned reasons and which is based on a stable exchange-rate trend compared with the first half of 2019 is now around €44 to 45 billion. Accordingly, the adjusted EBIT margin for the full year is expected to be around 7 to 7.5 percent.
“Our second quarter was solid despite a further downturn in the market environment. We are now less optimistic about the second half of the year than we were before. The reason for this is the continuing downward trend in vehicle production in Europe, in North America and particularly in China. Unresolved trade conflicts are also contributing to economic uncertainty. Therefore, we are adjusting our outlook for the year as a whole,” said Continental’s CFO Wolfgang Schäfer.
Preliminary second quarter results in line with expectations
Preliminary key data shows that sales and earnings in the second quarter of 2019 developed solidly despite all the challenges. In the second quarter, Continental achieved consolidated sales of around €11.2 billion (PY: €11.4 billion) and an adjusted EBIT margin of around 7.8 percent (PY: 10.2 percent).
Sales in the Automotive Group in the second quarter of 2019 were around €6.7 billion (PY: €7.0 billion) and the adjusted EBIT margin was around 5.5 percent (PY: 8.0 percent). In the same period, the Rubber Group achieved sales of around €4.5 billion (PY: €4.4 billion) and an adjusted EBIT margin of around 12.3 percent (PY: 14.3 percent).
Continental will report its results for the first half of 2019 on August 7, 2019.
Overview of the changes to the outlook for fiscal 2019
- Consolidated sales are now expected to amount to around €44 to €45 billion. The adjusted EBIT margin is expected to be around 7 to 7.5 percent (previously: sales of around €45 to €47 billion; adjusted EBIT margin around 8 to 9 percent).
- Sales in the Automotive Group are now expected to amount to around €26 to €26.5 billion. The adjusted EBIT margin is expected to be around 4.2 to 4.8 percent (previously: sales of around €27 to €28 billion; adjusted EBIT margin of around 6 to 7 percent).
- Sales in the Rubber Group are now expected to amount to around €18 to €18.5 billion. The adjusted EBIT margin is expected to be around 12 to 12.5 percent (previously: sales of around €18 to €19 billion; adjusted EBIT margin around 12 to 13 percent).
- Capital expenditure on property, plant, equipment and software, before financial investments and including from IFRS 16, is expected to be less than 8 percent (previously: around 8 percent).
- Free cash flow before acquisitions, including effects from IFRS 16 and without carve-out effects from the transformation of the Powertrain division into an independent group of legal entities, is now expected to be in the range of €1.2 to €1.4 billion (previously: around €1.4 to €1.6 billion).
The adjusted forecasts are based on current assumptions that the exchange-rate trend will be stable compared with the first half of 2019.
The other parts of the outlook issued on May 9, 2019, remain unchanged.