(new: management statements, share price updated, further analyst opinions)

HANNOVER (dpa-AFX) - After significant improvements in the past year, the automotive supplier and tire manufacturer Continental is once again taking on more in the weakening automotive supply business. The initiated cost-cutting program with job cuts in the division should provide tailwind as well as higher sales prices and efficiency improvements. For the first time since 2019, the Hanover-based company was back in the black in this area last year. Conti CEO Nikolai Setzer was able to present a jump in profits for the Group as a whole on Thursday. Conti shares nevertheless fell.

The stock lost 2.4 percent to 71.08 euros in the afternoon. Since the beginning of the year, the share price has fallen by 7.6 percent. JPMorgan analyst Jose Asumendi spoke of strong results and a positive outlook. However, high one-off expenses weighed on the prospects for free cash flow. However, George Galliers from Goldman Sachs described the fourth quarter performance of the automotive supply business as disappointing. Stifel expert Alexander Wahl expects market estimates for the operating profit of the group as a whole to fall.

Last year, the automotive supply division performed better than in the previous year, partly because the still difficult supply situation for electronic chips eased and fewer special freight costs were incurred. In this business, which has been in crisis for a long time, the management has cut thousands of jobs. Around 7150 jobs are on the agenda, 5400 of which are in administration. The division's annual costs are set to fall by 400 million euros by 2025, if the division's CEO Philipp von Hirschheydt has his way. On top of this, there will also be job cuts in research and development.

Last year, thanks to a final spurt, 1.9 percent of turnover remained in the automotive supply business as operating profit before special effects and interest and taxes. The Group had targeted around 2 to 3 percent. In a conference call with analysts, CEO Setzer said that the Group was still underrepresented among the up-and-coming domestic car manufacturers in the large Chinese market. These are currently growing strongly, particularly in the electric car sector, and are taking market share away from established manufacturers such as the German groups.

According to CFO Katja Garcia Vila, orders from China were already looking better in 2023. "In our current order intake in China, we are seeing a growing share from Chinese manufacturers," she said in an interview with the news agencies dpa-AFX and dpa. "We will therefore certainly also be a sought-after partner if certain players in other regions of the world become more involved with production capacities in the future."

For the current year, Conti is aiming for a further improvement in profitability in the automotive business. The operating profit margin is expected to rise to between around 3.0 and 4.0 percent this year. Analysts had previously expected a figure at the lower end of the range.

Within the Group as a whole, Conti's tire division once again delivered the lowest share of profits. Overall, the DAX-listed company posted a jump in net profit to 1.16 billion euros. A year earlier, the figure was just under 67 million euros.

The dividend is set to rise by 70 cents to 2.20 euros. That is a total of around 440 million euros. The majority of this will go to the Schaeffler family of industrialists, who hold 46 percent of the shares through their holdings.

Turnover climbed by 5.1 percent to 41.4 billion euros. The operating result increased by almost a third to 2.52 billion euros. This corresponds to a margin of 6.1 percent. In the new year, CEO Setzer is aiming for a figure of 6.0 to 7.0 percent. As in previous years, the management expects costs to rise; this time, higher wages and salaries are likely to have a negative impact of around 500 million euros compared to the previous year. Around half of this will affect the automotive supply division.

Based on the exchange rates from the beginning of the year, total turnover is expected to reach 41.0 to 44.0 billion euros. "In 2024, we will once again get to work and persistently pursue our annual targets," said Setzer according to the press release. The Lower Saxony-based company is not expecting a tailwind from rising global production of cars and light commercial vehicles.

CFO Garcia Vila is aiming for a cash inflow (free cash flow) of between 0.7 and 1.1 billion, adjusted for acquisitions and divisional disposals. This is less than the 1.3 billion euros from the previous year, despite the better estimated profit development.

However, the manager referred to high extraordinary expenses of around one billion euros. According to the information provided, these result on the one hand from the buyback of company shares from a Conti pension fund. In addition, Conti is spinning off certain business areas from the plastics technology and automotive supplier divisions, which are being put to the test. Money is also likely to flow out for the Group's restructuring./men/ngu/mis/stk