“Sufficient potential for improvement” – Continental publishes Q1 2024 results

Continental has reported its Q1 2024 financial results – and refers to the three months to 31 March as “a weak first quarter.” The tyre and automotive components company nonetheless “expects earnings to improve as the year progresses,” particularly during the second half of the year. As such, Continental confirms its previously announced full-year 2024 outlook.

In the first quarter of 2024, Continental achieved consolidated sales of €9.8 billion, 5.0 per cent below the result for Q1 2023. The company’s adjusted operating result was down 65.8 per cent year-on-year, to €196 million. This corresponds to an adjusted EBIT margin of 2.0 per cent (Q1 2023: 5.6%).

Net income in the first quarter of 2024 amounted to – €53 million (Q1 2023: €382 million). Adjusted free cash flow was – €1.1 billion (Q1 2023: – €949 million).

“As announced, adjusted free cash flow in the first quarter was heavily impacted by the €500 million payment for the buyback of shares in ContiTech AG. For the year as a whole, we still anticipate adjusted free cash flow of around €0.7 billion to €1.1 billion,” says Katja Garcia Vila, Continental’s chief financial officer. “Despite the weak first quarter, we see sufficient potential for improvement across all group sectors, which is why we are confirming our outlook for fiscal 2024.”

Tires performance

Continental’s Tires group sector generated sales of €3.3 billion, a 5.0 per cent year-on-year decrease. At 11.7 per cent, sector adjusted EBIT margin was still in the double digits, albeit down on the 13.4 per cent achieved in Q1 2023. The main reasons were weak tyre markets in the truck and original equipment business, negative exchange-rate effects and fewer workdays in March. This, in turn, shifted the tyre replacement business to April, and Continental notes that this “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.

Automotive

In the Automotive group sector, sales decreased by 4.0 per cent year-on-year, to €4.8 billion. Sector adjusted EBIT margin was down year-on-year at -4.3 per cent (Q1 2023: 0.8%). 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, Continental anticipates that price adjustments, initial savings from cost-cutting measures and efficiency improvements will lead to an increase in earnings.

ContiTech

The ContiTech group sector posted sales of €1.6 billion, down 4.8 per cent year-on-year in the first quarter of 2024. Adjusted EBIT margin was 5.4 per cent (Q1 2023: 6.5%). 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.

2024 outlook

Continental confirms the full-year outlook that it announced on 16 April 2024. Overall, the company 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 per cent.

Further information is available here