China, North America drive Conti’s rubber division

Hanover, Germany – Continental AG’s Rubber Technologies group – including tires and ContiTech divisions – achieved sales of €4.3 billion during the three months to end of September, down 1.4% compared to the €4.6 billion reported in 2019. 

The division posted an adjusted EBIT margin of 15.0%, up from 11.8% in the third quarter of 2019, the German group announced 11 Nov. 

Conti attributed the positive margin development in the third quarter of 2020 primarily to higher cost discipline, lower raw material costs as well as “solid sales figures in China and North America.” 

Sales in the tire division fell 0.5% to €2.88 billion during the quarter, supported by strong Chinese and US markets.

Adjust EBIT was up 17.6% year-on-year at €494 million, reflecting a strong price/mix and a significant €90-million raw material tailwind. EBIT margin came in at 17.1%, up from 14% last year.

“China continues to be the leading region [with] 11% year-over-year growth [in automotive production] in the quarter and North America production was able to slightly beat its prior year level,” said chief financial officer Wolfgang Schafer during an earnings call 11 Nov.

Europe remained the lagging region at negative 8%, with the key German and French markets down by 16% respectively 23%,” Schafer explained.

According to Schafer, demand growth for tires were mainly in line with vehicle production levels.

In replacement markets, Schafer said Conti saw a “strong sequential recovery” in the same regions and in line with vehicle production. 

“Third quarter [replacement] volumes in China were well ahead of last year… while North America also bounced back on prior year level,” he said.

Demand in European improved, but at a slower pace than other region, reflecting a “major impact” from weaker demand for winter tires.

In the ContiTech business area, adjusted EBIT rose 29% year-on-year to €154 million, supported by the structural measures that have been undertaken since 2018 as well as the high cost discipline. EBIT margin came in at 10.6%, up from 7.5% last year.

Segment sales fell 5% to €1.4 billion, reflecting a 4.3% negative currency impact and a decline in demand in aftermarket sales.  

ContiTech said it experienced “regulation-driven” demand in China particularly for its truck air springs. 

The tailwind from raw-material prices and substantially reduced expenses also positively impacted profitability.