Conti upbeat about second half despite ‘hurricane-like’ headwinds

Hanover, Germany – Continental AG has expressed optimism for the second half of 2022, despite ‘hurricane-like’ headwinds hitting the German manufacturer.

Announcing the group’s second half results 9 Aug, CFO Katja Duerrfeld said the Hanover-based group was maintaining its outlook for the current fiscal year, although the ongoing turbulent market environment had "a noticeable impact" on its second quarter results.

In particular, Continental said that geopolitical uncertainties resulted from the war against Ukraine; disrupted supply chains; “massive” price increases for raw materials, semi-finished products, energy and logistics, as well as Covid resurgence in China had “heavily affected” its results.

“The current headwind is rather like a hurricane and will not subside any time soon. Given this environment, we have performed well and become more resilient," said Duerrfeld.

In the second half of the year, Continental said it anticipated a stabilisation of global supply chains, a slight improvement in the availability of semiconductors and continued stable energy supplies in Europe, and particularly in Germany.

All in all, Continental said it still anticipated consolidated sales for the year as a whole of around €38.3 to €40.1 billion, which includes additional costs of €3.5 billion as a result of price increases for raw materials, semi-finished products, energy and logistics. 

During the second quarter, Continental’s Tires business reported a 7% year-on-year decline in earnings (EBITDA) to €672 million, on 17% higher sales of €3.4 billion.

Over the first six months, earnings were up 4.5% at €1.4 billion, on 18.5% higher sales of €6.6 billion.

First half sales volumes, both for OE and replacement markets, were down however, due to Covid lockdowns in China and the war in Ukraine.

In the commercial vehicle tire business, sales figures stablised on par with the previous year’s level, while electric vehicle tires market grew.

The ContiTech group sector also felt the effects of increased costs and weaker automotive production in the second quarter, with earnings falling 57% to €76 million.

The unit posted an 8% increase in second quarter sales to €1.6 billion, driven by the industrial hose business which performed “particularly well” as well as higher sales of conveyor belts and air spring systems.

Over the first six months, earnings fell 44% to €220 million, on 5.7% higher sales of €3.1 billion.

Here, while sales in automotive OE were below the previous year’s level, sales in the industrial and replacement business increased, in some cases significantly, said Conti.

Earlier in March, Continental said it expected the Tires business unit to report sales of between around €13.3 billion and €13.8 billion in 2022, with an adjusted EBIT margin ranging between 13.5-14.5%.

For the ContiTech group sector, Continental projected sales of between €6.0 billion and €6.3 billion with an adjusted EBIT margin ranging between 7.0-8.0%.