CONTINENTAL AG Quarterly Statement as at March 31, 2024
After a Weak Start: Continental Confirms Its Full-year Outlook
- Consolidated sales of €9.8 billion (Q1 2023: €10.3 billion, -5.0 percent)
- Adjusted EBIT of €196 million (Q1 2023: €574 million, -65.8 percent)
- Adjusted EBIT margin of 2.0 percent (Q1 2023: 5.6 percent)
- Net income attributable to the shareholders of the parent was -€53 million (Q1 2023: €382 million, -113.9 percent)
- Adjusted free cash flow of -€1.1 billion (Q1 2023: -€949 million, -14.4 percent)
- Outlook for 2024 unchanged: consolidated sales of around €41.0 billion to €44.0 billion; adjusted EBIT margin of around 6.0 to 7.0 percent
After a weak first quarter in 2024, Continental expects earnings to improve as the year progresses - particularly in the second half of the year. Based on this, Continental is confirming its outlook for the full year, as already announced together with the publication of its key figures for the first quarter on April 16, 2024. All in all, Continental still anticipates consolidated sales for 2024 of around €41.0 billion to €44.0 billion and an adjusted EBIT margin of around 6.0 to 7.0 percent.
In 2024, Continental will take a further step forward. The first quarter will be its weakest this year. The three group sectors - Automotive, Tires and ContiTech - will then see improvements as the year progresses.
Slight decline in automotive production in the first quarter of 2024
At the start of the year, global passenger car and light commercial vehicle production recorded a slight decline year-on-year, falling by around 1 percent compared with the first quarter of 2023 to 21.2 million units (Q1 2023: 21.4 million units). Vehicle production in our core market of Europe, in particular, was weaker from January to March 2024 than in the prior-year period, at around 4.4 million units (-3 percent). In North America, production rose slightly to around 3.9 million vehicles (+1 percent). China had a good start to the year, producing around 6.1 million vehicles in the first quarter of 2024, up 4 percent year-on-year. For the year as a whole, Continental still expects global passenger car and light commercial vehicle production to be roughly on par with the previous year, trending in a range of -1 to +1 percent.
Consolidated sales in the first quarter of €9.8 billion; adjusted EBIT margin of 2.0 percent.
In the first quarter of 2024, Continental achieved consolidated sales of €9.8 billion (Q1 2023: €10.3 billion, -5.0 percent). Its adjusted
operating result was €196 million (Q1 2023: €574 million, -65.8 percent), corresponding to an adjusted EBIT margin of 2.0 percent
(Q1 2023: 5.6 percent). Net income attributable to the shareholders of the parent in the first quarter amounted to -€53 million
(Q1 2023: €382 million, -113.9 percent). Adjusted free cash flow was -€1.1 billion (Q1 2023: -€949 million, -14.4 percent). As announced, this was heavily impacted in the first quarter of 2024 by the €500-million payment for the buyback of shares in ContiTech AG (now operating under the name ContiTech Deutschland GmbH).
Development of the group sectors
In the Automotive group sector, sales decreased by 4.0 percent to €4.8 billion (Q1 2023: €5.0 billion). The adjusted EBIT margin was
down year-on-year at -4.3 percent (Q1 2023: 0.8 percent). This was mainly due to lower production volumes, especially in Europe, as well as pending agreements from price negotiations with automotive manufacturers. Delayed product launches, weak business in North America and exchange-rate effects also had a negative impact, while salary increases hampered profitability. As the year progresses, price adjustments, initial savings from cost-cutting measures and efficiency improvements will lead to an increase in earnings.
The Tires group sector generated sales of €3.3 billion (Q1 2023: €3.5 billion, -5.0 percent). At 11.7 percent, its adjusted EBIT margin was
still in the double digits, albeit down on the first quarter of the previous year (Q1 2023: 13.4 percent). The main reasons were weak tire markets in the truck and original equipment business, negative exchange-rate effects and fewer workdays in March. This, in turn, shifted the tire-replacement business to April, which already appears to be a considerably stronger month for earnings. In the months ahead, the Tires group sector will also benefit from an expected increase in demand.
The ContiTech group sector posted sales of €1.6 billion (Q1 2023: €1.7 billion, -4.8 percent) and an adjusted EBIT margin of 5.4 percent
(Q1 2023: 6.5 percent) in the past quarter. Earnings were adversely impacted by weak industrial demand. In addition, the Original Equipment Solutions (OESL) business area, which makes up a large part of ContiTech's business with automotive manufacturers, is not expected to see improvements until the second half of the year.
Sales in the Contract Manufacturing group sector were €80 million in the first quarter of 2024 (Q1 2023: €154 million), and the adjusted
EBIT margin was 0.9 percent (Q1 2023: 6.2 percent).
Continental AG Quarterly Statement as at March 31, 2024 | 2 |
Outlook for fiscal 2024 unchanged
Continental expects the global production of passenger cars and light commercial vehicles in 2024 to be roughly on par with the previous year (-1 to +1 percent), with a negative development expected in its core market of Europe (-3 to -1 percent). This outlook takes into account the current tense geopolitical situation and its expected impact on production volumes in 2024. Higher costs for wages and salaries - amounting to around €0.5 billion - are expected to weigh heavily on our earnings position in fiscal 2024, with around half of these costs attributable to the Automotive group sector.
Based on the above assumptions as well as current exchange rates, we expect the following key financial figures for fiscal 2024:
- We expect the Continental Group to achieve sales in the range of around €41.0 billion to €44.0 billion and an adjusted EBIT margin of around 6.0 to 7.0 percent.
- We expect our Automotive group sector to achieve sales of around €20.0 billion to €22.0 billion and an adjusted EBIT margin of around 3.0 to 4.0 percent.
- We expect our Tires group sector to achieve sales of around €14.0 billion to €15.0 billion and an adjusted EBIT margin of around
- to 14.0 percent.
- We expect our ContiTech group sector to achieve sales of around €6.6 billion to €7.0 billion and an adjusted EBIT margin of around
- to 7.5 percent.
- In the Contract Manufacturing group sector, we anticipate sales of around €200 million to €300 million and an adjusted EBIT margin of around 0 percent.
- Consolidated amortization from purchase price allocations is expected to be around €100 million and affect mainly the Automotive and ContiTech group sectors.
- In addition, we expect negative special effects of around €450 million.
- In 2024, we expect the negative financial result to be around €350 million before effects from currency translation, effects from changes in the fair value of derivative instruments, and other valuation effects.
- The tax rate is expected to be around 27 percent.
- The capital expenditure ratio is expected to be around 6.0 to 7.0 percent of sales in fiscal 2024.
- In 2024, we are planning on adjusted free cash flow of approximately €0.7 billion to €1.1 billion.
Continental AG Quarterly Statement as at March 31, 2024 | 3 |
Key Figures for the Continental Group
January 1 to March 31 | |||
Continental Group in € millions | 2024 | 2023 | |
Sales | 9,788 | 10,306 | |
EBITDA | 661 | 1,070 | |
in % of sales | 6.8 | 10.4 | |
EBIT | 118 | 531 | |
in % of sales | 1.2 | 5.2 | |
Net income attributable to the shareholders of the parent | -53 | 382 | |
Basic earnings per share in € | -0.27 | 1.91 | |
Diluted earnings per share in € | -0.27 | 1.91 | |
Research and development expenses (net) | 825 | 791 | |
in % of sales | 8.4 | 7.7 | |
Depreciation and amortization1 | 543 | 539 | |
thereof impairment2 | 4 | 0 | |
Capital expenditure3 | 432 | 429 | |
in % of sales | 4.4 | 4.2 | |
Operating assets as at March 31 | 20,163 | 20,864 | |
Number of employees as at March 314 | 200,888 | 202,929 | |
Adjusted sales5 | 9,761 | 10,286 | |
Adjusted operating result (adjusted EBIT)6 | 196 | 574 | |
in % of adjusted sales | 2.0 | 5.6 | |
Free cash flow | -1,083 | -952 | |
Net indebtedness as at March 31 | 5,205 | 5,539 | |
Gearing ratio in % | 36.4 | 39.4 |
1 Excluding impairment on financial investments.
2 Impairment also includes necessary reversals of impairment losses.
3 Capital expenditure on property, plant and equipment, and software.
4 Excluding trainees.
5 Before changes in the scope of consolidation.
6 Before amortization of intangible assets from purchase price allocation (PPA), changes in the scope of consolidation, and special effects.
Continental AG Quarterly Statement as at March 31, 2024 | 4 |
Key Figures for the Group Sectors
January 1 to March 31 | |||
Automotive in € millions | 2024 | 2023 | |
Sales | 4,813 | 5,015 | |
EBITDA | 12 | 269 | |
in % of sales | 0.3 | 5.4 | |
EBIT | -255 | 16 | |
in % of sales | -5.3 | 0.3 | |
Research and development expenses (net) | 688 | 662 | |
in % of sales | 14.3 | 13.2 | |
Depreciation and amortization1 | 267 | 254 | |
thereof impairment2 | 3 | 0 | |
Capital expenditure3 | 230 | 221 | |
in % of sales | 4.8 | 4.4 | |
Operating assets as at March 31 | 9,023 | 9,099 | |
Number of employees as at March 314 | 101,294 | 100,719 | |
Adjusted sales5 | 4,813 | 5,015 | |
Adjusted operating result (adjusted EBIT)6 | -205 | 39 | |
in % of adjusted sales | -4.3 | 0.8 |
January 1 to March 31 | ||||
Tires in € millions | 2024 | 2023 | ||
Sales | 3,290 | 3,463 | ||
EBITDA | 570 | 660 | ||
in % of sales | 17.3 | 19.1 | ||
EBIT | 374 | 458 | ||
in % of sales | 11.4 | 13.2 | ||
Research and development expenses (net) | 88 | 85 | ||
in % of sales | 2.7 | 2.4 | ||
Depreciation and amortization1 | 195 | 202 | ||
thereof impairment2 | 1 | 0 | ||
Capital expenditure3 | 139 | 161 | ||
in % of sales | 4.2 | 4.6 | ||
Operating assets as at March 31 | 7,451 | 7,808 | ||
Number of employees as at March 314 | 56,461 | 57,573 | ||
Adjusted sales5 | 3,290 | 3,443 | ||
Adjusted operating result (adjusted EBIT)6 | 386 | 461 | ||
in % of adjusted sales | 11.7 | 13.4 | ||
1 | Excluding impairment on financial investments. | |||
2 | Impairment also includes necessary reversals of impairment losses. | |||
3 | Capital expenditure on property, plant and equipment, and software. | |||
4 | Excluding trainees. | |||
5 | Before changes in the scope of consolidation. | |||
6 | Before amortization of intangible assets from purchase price allocation (PPA), changes in the scope of consolidation, and special effects. |
Continental AG Quarterly Statement as at March 31, 2024 | 5 |
January 1 to March 31 | |||
ContiTech in € millions | 2024 | 2023 | |
Sales | 1,647 | 1,731 | |
EBITDA | 147 | 172 | |
in % of sales | 8.9 | 9.9 | |
EBIT | 73 | 96 | |
in % of sales | 4.4 | 5.6 | |
Research and development expenses (net) | 49 | 44 | |
in % of sales | 3.0 | 2.5 | |
Depreciation and amortization1 | 74 | 76 | |
thereof impairment2 | - | - | |
Capital expenditure3 | 57 | 41 | |
in % of sales | 3.5 | 2.4 | |
Operating assets as at March 31 | 3,240 | 3,262 | |
Number of employees as at March 314 | 41,559 | 42,276 | |
Adjusted sales5 | 1,620 | 1,731 | |
Adjusted operating result (adjusted EBIT)6 | 88 | 113 | |
in % of adjusted sales | 5.4 | 6.5 |
January 1 to March 31 | ||||
Contract Manufacturing in € millions | 2024 | 2023 | ||
Sales | 80 | 154 | ||
EBITDA | 4 | 16 | ||
in % of sales | 5.3 | 10.6 | ||
EBIT | 1 | 9 | ||
in % of sales | 0.8 | 6.1 | ||
Research and development expenses (net) | 0 | 0 | ||
in % of sales | 0.0 | 0.0 | ||
Depreciation and amortization1 | 4 | 7 | ||
thereof impairment2 | - | - | ||
Capital expenditure3 | 1 | 1 | ||
in % of sales | 1.0 | 0.6 | ||
Operating assets as at March 31 | 320 | 497 | ||
Number of employees as at March 314 | 1,075 | 1,845 | ||
Adjusted sales5 | 80 | 154 | ||
Adjusted operating result (adjusted EBIT)6 | 1 | 10 | ||
in % of adjusted sales | 0.9 | 6.2 | ||
1 | Excluding impairment on financial investments. | |||
2 | Impairment also includes necessary reversals of impairment losses. | |||
3 | Capital expenditure on property, plant and equipment, and software. | |||
4 | Excluding trainees. | |||
5 | Before changes in the scope of consolidation. | |||
6 | Before amortization of intangible assets from purchase price allocation (PPA), changes in the scope of consolidation, and special effects. |
Continental AG Quarterly Statement as at March 31, 2024 | 6 |
Consolidated Statement of Income
This quarterly statement was prepared in accordance with the accounting and measurement methods described in the International Financial Reporting Standards (IFRS) applicable at the end of the reporting period and endorsed by the European Union.
January 1 to March 31 | |||
€ millions | 2024 | 2023 | |
Sales | 9,788 | 10,306 | |
Cost of sales | -7,852 | -8,037 | |
Gross margin on sales | 1,936 | 2,269 | |
Research and development expenses | -1,038 | -1,030 | |
Selling and logistics expenses | -654 | -624 | |
Administrative expenses | -318 | -304 | |
Other income | 361 | 361 | |
Other expenses | -178 | -146 | |
Income from equity-accounted investees | 9 | 4 | |
Other income from investments | 0 | 0 | |
EBIT | 118 | 531 | |
Interest income | 24 | 22 | |
Interest expense | -103 | -86 | |
Effects from currency translation | -7 | 29 | |
Effects from changes in the fair value of derivative instruments, and other valuation effects | -13 | 0 | |
Financial result | -99 | -34 | |
Earnings before tax | 19 | 497 | |
Income tax expense | -70 | -105 | |
Net income | -51 | 393 | |
Non-controlling interests | -2 | -10 | |
Net income attributable to the shareholders of the parent | -53 | 382 | |
Basic earnings per share in € | -0.27 | 1.91 | |
Diluted earnings per share in € | -0.27 | 1.91 |
Continental AG Quarterly Statement as at March 31, 2024 | 7 |
Consolidated Statement of Comprehensive
Income
January 1 to March 31 | |||
€ millions | 2024 | 2023 | |
Net income | -51 | 393 | |
Items that will not be reclassified to profit or loss | |||
Remeasurement of defined benefit plans1 | 129 | -27 | |
Fair value adjustments1 | 137 | -32 | |
Currency translation1 | -8 | 5 | |
Other investments | 0 | -50 | |
Fair value adjustments1 | 1 | -50 | |
Currency translation1 | 0 | 0 | |
Tax on other comprehensive income | -40 | 14 | |
Items that may be reclassified subsequently to profit or loss | |||
Currency translation1 | 159 | 5 | |
Effects from currency translation1 | 159 | 5 | |
Reclassification adjustments to profit or loss | 0 | - | |
Other comprehensive income | 248 | -59 | |
Comprehensive income | 197 | 334 | |
Attributable to non-controlling interests | 4 | -6 | |
Attributable to the shareholders of the parent | 201 | 329 |
1 Including non-controlling interests.
Continental AG Quarterly Statement as at March 31, 2024 | 8 |
Consolidated Statement of Financial Position
Assets
€ millions | March 31, 2024 | Dec. 31, 2023 | March 31, 2023 |
Goodwill | 3,195 | 3,187 | 3,200 |
Other intangible assets | 785 | 820 | 921 |
Property, plant and equipment | 11,700 | 11,722 | 11,409 |
Investment property | 11 | 11 | 11 |
Investments in equity-accounted investees | 309 | 299 | 308 |
Other investments | 119 | 118 | 121 |
Deferred tax assets | 2,599 | 2,512 | 2,158 |
Defined benefit assets | 115 | 111 | 95 |
Long-term derivative instruments and interest-bearing investments | 101 | 89 | 101 |
Long-term other financial assets | 266 | 272 | 263 |
Long-term other assets | 24 | 24 | 113 |
Non-current assets | 19,224 | 19,165 | 18,699 |
Inventories | 6,447 | 6,276 | 7,194 |
Trade accounts receivable | 7,829 | 7,569 | 8,430 |
Short-term contract assets | 116 | 103 | 123 |
Short-term other financial assets | 123 | 136 | 128 |
Short-term other assets | 1,172 | 1,144 | 1,136 |
Income tax receivables | 381 | 305 | 285 |
Short-term derivative instruments and interest-bearing investments | 132 | 120 | 120 |
Cash and cash equivalents | 2,349 | 2,923 | 2,252 |
Assets held for sale | 11 | 11 | 0 |
Current assets | 18,560 | 18,588 | 19,668 |
Total assets | 37,784 | 37,753 | 38,367 |
Continental AG Quarterly Statement as at March 31, 2024 | 9 |
Equity and liabilities
€ millions | March 31, 2024 | Dec. 31, 2023 | March 31, 2023 |
Subscribed capital | 512 | 512 | 512 |
Capital reserves | 4,156 | 4,156 | 4,156 |
Retained earnings | 10,714 | 10,767 | 10,293 |
Other comprehensive income | -1,505 | -1,759 | -1,373 |
Equity attributable to the shareholders of the parent | 13,877 | 13,676 | 13,588 |
Non-controlling interests | 436 | 449 | 469 |
Total equity | 14,313 | 14,125 | 14,057 |
Long-term employee benefits | 3,035 | 3,148 | 2,685 |
Deferred tax liabilities | 90 | 72 | 58 |
Long-term provisions for other risks and obligations | 671 | 703 | 641 |
Long-term indebtedness1 | 4,609 | 4,528 | 4,782 |
Long-term other financial liabilities | 9 | 8 | 10 |
Long-term contract liabilities | 6 | 6 | 7 |
Long-term other liabilities | 27 | 28 | 28 |
Non-current liabilities1 | 8,446 | 8,494 | 8,212 |
Short-term employee benefits | 1,623 | 1,391 | 1,467 |
Trade accounts payable | 6,585 | 6,875 | 7,368 |
Short-term contract liabilities | 174 | 195 | 207 |
Income tax payables | 571 | 541 | 526 |
Short-term provisions for other risks and obligations | 1,062 | 1,081 | 956 |
Short-term indebtedness1 | 3,177 | 2,642 | 3,230 |
Short-term other financial liabilities | 1,049 | 1,670 | 1,589 |
Short-term other liabilities | 783 | 739 | 756 |
Current liabilities1 | 15,025 | 15,134 | 16,098 |
Total equity and liabilities | 37,784 | 37,753 | 38,367 |
1 Amendments to IAS 1, Presentation of Financial Statements, clarify the classification of current and non-current liabilities from the 2024 reporting year onward. The comparative periods have been adjusted accordingly.
Continental AG Quarterly Statement as at March 31, 2024 | 10 |
Consolidated Statement of Cash Flows
January 1 to March 31 | |||
€ millions | 2024 | 2023 | |
Net income | -51 | 393 | |
Income tax expense | 70 | 105 | |
Financial result | 99 | 34 | |
EBIT | 118 | 531 | |
Interest paid | -89 | -54 | |
Interest received | 28 | 33 | |
Income tax paid | -187 | -168 | |
Dividends received | 0 | 1 | |
Depreciation, amortization, impairment and reversal of impairment losses | 543 | 539 | |
Income from equity-accounted investees and other investments, incl. impairment and reversal of impairment losses | -9 | -4 | |
Gains/losses from the disposal of assets, companies and business operations | 0 | -3 | |
Changes in | |||
inventories | -139 | -467 | |
trade accounts receivable | -197 | -633 | |
trade accounts payable | -320 | -291 | |
employee benefits and other provisions | 156 | 141 | |
other assets and liabilities as well as other non-cash effects | -616 | -220 | |
Cash flow arising from operating activities | -712 | -595 | |
Capital expenditure on property, plant and equipment, and software | -376 | -361 | |
Capital expenditure on intangible assets from development projects and miscellaneous | -7 | -7 | |
Disposal of property, plant and equipment, and intangible assets | 9 | 14 | |
Acquisition of companies and business operations | -1 | -3 | |
Disposal of companies and business operations | 4 | - | |
Cash flow arising from investing activities | -371 | -357 | |
Cash flow before financing activities (free cash flow) | -1,083 | -952 | |
Repayment of lease liabilities | -82 | -78 | |
Change in other indebtedness | 617 | 342 | |
Change in derivative instruments and interest-bearing investments | -33 | -24 | |
Other cash changes | -2 | -4 | |
Dividends paid to and cash changes from equity transactions with non-controlling interests | -1 | -4 | |
Cash flow arising from financing activities | 499 | 232 | |
Change in cash and cash equivalents | -584 | -720 | |
Cash and cash equivalents at the beginning of the reporting period | 2,923 | 2,988 | |
Effect of exchange-rate changes on cash and cash equivalents | 9 | -16 | |
Cash and cash equivalents at the end of the reporting period | 2,349 | 2,252 |
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Continental AG published this content on 08 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 May 2024 05:34:08 UTC.
