Continental AG has reported significant increases in earnings in all three groups of sectors compared to the first quarter of the year.
In the second quarter of 2024, the company’s tire sector generated sales of $3.7 billion – down 1.7% compared to the same period last year.
At 14.7%, the adjusted EBIT margin of tire sales was higher than in previous years and up sharply in the first quarter of 2024.
The company says tire sales benefited from a strong tire-replacement business, especially in Europe.
Continental's net income in the second quarter amounted to $334 million compared to $229 million this time last year.
The company’s consolidated sales reached $11.1 billion in the second quarter of 2024, which is a 4.1% decrease from 2023.
Its adjusted operating result increased 40.6% corresponding to an adjusted EBIT margin of 7%.
“As announced, we improved in all group sectors compared with the first quarter,” says Nikolai Setzer, CEO of Continental.
“We have made significant progress in automotive and aim to improve even further in the coming quarters. Tires achieved good results, while ContiTech also performed well despite a still weak industrial environment. In the current challenging market environment, the improvements in earnings are mainly due to the measures we have taken in the group sectors.”
Vehicle production trends
Continental said globally, passenger car and light commercial vehicle production in the second quarter of 2024 was similar to the previous year – falling marginally by 1% to 22.1 million units. But production varies by region.
Vehicle production in Europe from April to June of this year was 6% lower than last year with 4.3 million units.
While in North America, Continental said production rose to 4.2 million vehicles — a 2% increase. In China, the gains were even larger — up 5% with production of around 7 million vehicles during the quarter.
Automotive and ContiTech
Continental’s automotive sector sales fell by 3.4%, but at 2.7% the adjusted EBIT margin improved year-on-year.
The company credits this to agreements from price negotiations with automotive manufacturers, the implementation of cost-cutting measures and efficiency improvements. The company expects the positive effects “to be even greater in the second half of the year.”
The ContiTech group posted sales of $1.8 billion, which is down 5.5% from last year with an adjusted EBIT margin of 7.1% in the second quarter.
Continental cited “weak industrial demand” during the period, and said strict cost discipline combined with price negotiation agreements in the automotive business kept ContiTech’s earnings up compared to the first quarter of this year.
Fiscal adjustment
For the current fiscal year, Continental says it expects the production of passenger cars and light commercial vehicles to go down by 3% to 1% year-on-year.
In large part this is due to conditions in Europe, where the company is now forecasting a slowdown of 4% to 6%. (Previous estimates were in the range of a 1% to 3% drop.) The company expects the North American market to land somewhere in the range of down 1% to a positive 2% in the tire replacement business.
With that picture in mind, Continental has adjusted its outlook for the full fiscal year. Overall sales, plus results for the automotive and tires groups have been lowered slightly.
Expected consolidated sales are estimated by the company to be around $44 billion to $46.5 billion and expects an adjusted EBIT margin of 6% to 7%.
For the automotive group, Continental expects sales of $21.3 billion to $23 billion with an adjusted EBIT of 2.5% to 3.5%.
For the tires group, the company expects sales of $15 billion to $16 billion and still expects an adjusted EBIT margin of 13% to 14%.
For the ContiTech sector, the outlook is unchanged. The company still expects sales of $7.2 billion to $7.7 billion and now expects an adjusted EBIT margin of 6.5% to 7%.
Adjusted free cash flow is expected to be around $.66 billion to $1.02 billion.
Continental says it plans to switch all its tire plants to full carbon-neutral production processes by 2040 at the latest.
Currently, the Lousado, Portugal plant is one of Continental’s largest tire manufacturing plant, producing 18 million tires annually.
“We will not let up in the second half of the year and will continue to work hard to achieve the financial targets we have set ourselves,” says Olaf Schick, chief financial officer of Continental.
