Hanover, Germany – Weak first quarter results and the prospect of an even weaker second quarter have prompted a series of new cost-cutting measures at Continental Corp., the German group announced 7 May.
Earnings (EBITDA) for the first three months of the year fell 21% to €1.1 billion, on 11% lower sales at €9.8 billion, primarily due to Covid-19 pandemic and a halt in production in China. Pre-tax operating income (adjusted EBIT) fell 51% to €431 million.
But Continental expects the second quarter to be “the weakest” this year, with the impact of coronavirus likely to be particularly severe in Europe and North America.
“Usually, we generate three-quarters of our sales in Europe and North America,” said CEO Dr. Elmar Degenhart, “But both regions have been hit hard by the effects of the coronavirus pandemic since the end of March.”
In response, Continental intensified its cost-cutting measures in the first quarter: postponing, until further notice, projects and investments that are not urgently required.
Moreover, the company aims to reduce its investments by at least 20% compared to the previous year.
“The economic environment has again deteriorated substantially since the beginning of March as a result of the coronavirus pandemic,” said Continental CFO Wolfgang Schaefer,
The effect of the measures, Schaefer said, will be noted in the group’s figures from the second quarter onwards.
Commenting on production suspensions due to Covid-19 pandemic, CEO Degenhart said more than 40% of Conti’s 249 locations underwent temporary halts of “a few days to several weeks.”
As of early May, production remains temporarily halted at one-fifth of locations worldwide, primarily in North America, Russia and India, he added. In Germany, production is still on hold at only one location.
About 60% of Continental’s nearly 240,000 employees worldwide are currently working reduced hours.
Continental declined to give a detailed outlook for 2020, but said it expected sales and earnings to “fall significantly short of the previous year’s figures.”