Less optimistic: Continental revises 2019 outlook, announces preliminary Q2 results
Continental has readjusted the full-year 2019 outlook for its tyre-making Rubber Group, primarily in response to declining global car and light vehicle production. It has also readjusted the outlook for its Automotive Group business for the same reason.
The company initially based its projected sales and EBIT margin calculations upon the assumption that 2019 vehicle production would be at the same level as last year. It now expects global light vehicle production will be around five per cent lower than in 2018.
As a result, Continental has reduced its full-year consolidated sales outlook for the Rubber Group to 18 billion to 18.5 billion euros (previously 18 billion to 19 billion euros). It expects an adjusted EBIT margin of circa 12 to 12.5 per cent (previously around 12 to 13 per cent).
It’s a similar story for the Automotive Group. Continental now anticipates full-year consolidated sales of 26 billion to 26.5 billion euros (previously 27 billion to 28 billion euros) and an adjusted EBIT margin of 4.2 to 4.8 per cent (previously 6 to 7 per cent).
Projected consolidated sales for the entire company have been revised to around 44 billion to 45 billion euros (previously 45 billion to 47 billion euros). Continental expects an adjusted EBIT margin of around 7 to 7.5 per cent (previously 8 to 9 per cent).
Continental issued its revised outlook with the caveat that the figures assume a continuation of currency exchange rate trends along the lines they took in the first half of the year. Other parts of the outlook issued on 9 May 2019 remain unchanged.
Q2 2019 results in line with expectations
Continental isn’t due to report its financial performance for the first half of 2019 until 7 August, however preliminary key data indicates that the Rubber Group slightly increased its sales in the second quarter of 2019 – albeit with a lower margin. Sales for the quarter were around 4.5 billion euros (Q2 2018: 4.4 billion euros) with an adjusted EBIT margin of around 12.3 per cent (Q2 2018: 14.3 per cent).
Automotive Group sales and margins are down year-on-year. Sales in the second quarter of 2019 amounted to approximately 6.7 billion euros (Q2 2018: 7.0 billion euros), while the adjusted EBIT margin was around 5.5 per cent (Q2 2018: 8.0 per cent).
Continental achieved overall consolidated sales of around 11.2 billion euros during the quarter (Q2 2018: 11.4 billion euros) and an adjusted EBIT margin of around 7.8 per cent (Q2 2018: 10.2 per cent).
Now less optimistic about second half of year
Chief financial officer Wolfgang Schäfer commented on these preliminary results cautiously: “Our second quarter was solid despite a further downturn in the market environment. We are now less optimistic about the second half of the year than we were before. The reason for this is the continuing downward trend in vehicle production in Europe, in North America and particularly in China. Unresolved trade conflicts are also contributing to economic uncertainty. Therefore, we are adjusting our outlook for the year as a whole.”