In response to the numbers, Conti shares have meanwhile turned negative.
(Photo: dpa)
Dusseldorf The automotive supplier Continental did not meet the expectations of its core business area in the second quarter. Surprisingly, the Dax group reported a loss for the automotive division on Wednesday. The adjusted EBIT margin slipped to minus 0.6 percent in the second quarter with sales of EUR 5.1 billion.
According to the mandatory notification, negative currency effects and persistently high costs for special freight are responsible for the division’s losses.
The weak development has an impact on the Group’s overall result. The adjusted EBIT margin in the second quarter was 4.8 percent with sales of 10.4 billion euros, around one percentage point below analysts’ expectations.
Difficult start for the new Continental board
Continental also burns money. The adjusted free cash flow was minus 15 million euros. This means that the company could not cover its investments with the income from the current business.
For Philipp von Hirschheydt, who has been appointed to the board of directors and has been in charge of the automotive business since May 1st, the weak quarterly result makes for a very bad start. Von Hirschheydt should now make the core business with car components, sensors and software, which has made losses for several years, profitable in the long term. This year alone, the division is expected to contribute a profit margin of two to three percent to the overall result.
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However, the analysts at investment bank Jefferies believe that Continental will find it increasingly difficult to convince investors of this growth course. “We are convinced that Conti must adjust its expectations in order to revive investor interest,” write the experts in a recent analysis. One problem is that the economic benefits of the restructuring that began in 2019 are taking effect too slowly.
Despite the losses in the automotive business and the negative free cash flow, Conti is sticking to its annual target. The Dax group expects sales of 42 to 45 billion euros and a profit margin of 5.5 to 6.5 percent. Conti expects the adjusted free cash flow to be between 0.8 and 1.2 billion euros.
Continental shares only briefly in the red
The company is particularly optimistic about the positive effects of price negotiations with customers. “Some negotiations were already successfully concluded in the third quarter,” says the mandatory notification.
Continental shares fell as much as 2.1 percent on Wednesday afternoon to a three-week low of EUR 67.22 after gaining 2.4 percent shortly before the announcement was published. It then went up 1.8 percent again to EUR 69.94.
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