In the past year, the automotive supplier booked 3.3 billion euros in additional costs for energy, logistics and materials.
(Photo: Bloomberg)
Dusseldorf The automotive supplier Continental was not able to reduce its dependence on the tire business in 2022 either. Of the roughly two billion euros in profit, more than 1.8 billion are attributable to the tire business.
Thanks to the strong results of Conti’s traditional division, the company was able to achieve an adjusted profit margin of around five percent despite adverse market conditions, as the group announced in Hanover on Wednesday. Sales increased by almost 17 percent to 39.4 billion euros.
2022 was not an easy year for the entire automotive supplier industry, but it was particularly difficult for Continental. In addition to rising raw material, energy and logistics costs – Conti estimates the additional costs at 3.3 billion euros – the company also had to deal with internal problems.
On the one hand, Conti is still dealing with the legal processing of the diesel scandal. The high legal costs for this would now also be discussed in the supervisory board, according to circles of the committee. On the other hand, there is still uncertainty over the Dax group as to whether hackers from the Lockbit ransomware group will publish sensitive company data that they were able to capture last summer.
Hackers managed to steal around 40 terabytes of data from Continental. The processing of the data theft is ongoing and is a strain on the company’s human and financial resources.
In turn, the operating business was additionally burdened by the build-up of high inventories and increased receivables. For these reasons, free cash flow fell from more than EUR 1 billion to EUR 200 million.
Automotive division continues to make losses
Continental wants to reduce the dividend by 70 cents to 1.50 euros per share, since net profit has collapsed to 67 million euros due to various special effects. In the previous year, Continental reported a net profit of 1.4 billion euros.
Nevertheless, Conti drew a positive balance. “We achieved our sales and earnings forecast at group level and thus achieved a respectable result,” explained CEO Nikolai Setzer. For the current year, Continental is forecasting consolidated sales of between EUR 42 and 45 billion and an adjusted return of between 5.5 and 6.5 percent.
However, the automotive division of Continental remains a problem on the balance sheet two years after Setzer took over the board position of the supplier. In the automotive division, Conti bundles its future business with car components, sensors and software.
Conti’s CEO has not yet been able to break the dependency on the tire division.
(Photo: dpa)
Despite immense expenses for research and development and increased investments, the unadjusted result deteriorated to a negative amount of 970 million euros. In the previous year, the amount was minus 375 million euros. The return on investment has fallen significantly again compared to 2021 from minus 4.6 to minus 11.1 percent.
The flagging automotive business is still being absorbed by the tire division. Here, the unadjusted EBIT fell slightly, but at 12.3 percent was still at a high level. The return on investment last year was 23 percent.
Weak market capitalization
The longer this imbalance persists within the group, the greater the pressure on CEO Setzer. He had moved to the top of the group with the aim of making the car business as successful as the tire division, which Setzer had managed himself for years. The employee representatives on the tire side had already hinted last year that the outflow of funds from the profitable traditional business to the automotive division should not remain permanent.
Concerns are apparently also growing on the financial markets. Continental’s market capitalization has fallen dramatically to below 15 billion euros. The second largest German auto supplier is now a shaky candidate in the Dax.
In this context, spin-off rumors keep coming up, according to which, for example, the business with automated driving could be floated on the stock market decoupled from the overall group. In financial circles it is said that this division alone could achieve a significantly higher market valuation.
Spin-offs from Continental have had good experiences so far. The Vitesco drive division has become an independent company through a spin-off. Vitesco’s share price has risen by more than 110 percent over the year, while Conti’s shares have risen by just 17.5 percent.
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