Conti rubber results down on slow demand, high costs

Hanover, Germany – Continental AG’s rubber group generated total sales of around €13.01 billion in the first nine months of 2018, only slightly up from €13.00 billion for the same period last year.

Earnings (EBITDA) fell 8.4% to €2.32 billion for the nine months to end of September, the German technology and automotive supplier said 8 Nov.

Tire sales for the period declined 11% to €8.28 billion for the period, despite a slight rise in sales in the third quarter.

Tire segment's earnings also fell 9.7% to €1.79 billion during the nine-month period.

According to Conti, sales figures for passenger and light truck tires were "slightly below" the previous year’s level in original equipment business and on par with the previous year’s figure in the tire replacement business.

Sales figures in commercial-vehicle tire business were 3% higher than the level of the previous year.

ContiTech reported growth in sales at €4.79 billion for the period, compared to €4.67 billion in 2017. Earnings, however, fell 3.8% to €529 million for the segment.

Continental revised down its results in August due to lower sales expectations, cost increases and undisclosed warranty cases.

For the Rubber Group, the sales forecast was lowered to around €17.5 billion and the adjusted EBIT margin was revised to more than 13%.

The company said on 8 Nov that it was maintaining the forecast announced in August, based on its market assumptions.

The corporation expects negative exchange-rate effects of around €1.2 billion across the group for the year 2018. In the first nine months of 2018, changes in exchange rates had a negative impact on sales of €1.1 billion.

Another factor impacting the Rubber Group's results is the price of crude, according to Conti.

"Every $10 increase in the average price of crude oil equates to a negative annual gross effect on EBIT of around $50 million," explained Conti.

The average price of North Sea Brent was around $54 in 2017 and $72 after the first nine months of 2018, the German company reported.

“As a result, we expect costs for carbon black and other chemicals to increase by more than 20% compared to the average prices in 2017,” Conti added.

For butadiene, the company has lowered its forecast for the average price for the year from $1.60/kg last year to $1.45/kg in 2018. The average natural rubber price for the year has also been lowered to $1.44/kg from the previous year levels of $1.67/kg.

For 2018 as a whole, Conti anticipates a negative impact of around €100 million in the Rubber Group due to the price increase for oil and higher prices for synthetic rubber. The company had previously expected the impact to be €50 million.