German tier 1 supplier Continental has announced its financial performance for the first quarter of CY2023, which it says are “solid results, in line with its expectations”.
The company achieved consolidated sales of 10.3 billion euro (Rs 90,516 crore), a growth of 11 percent, adjusted EBIT margin of 5.6 percent and a net income of 382 million euro (Rs 3,357 crore), up 59.6 percent.
It anticipates a further improvement in earnings over the course of the year, in particular, due to rising production numbers for passenger cars and light commercial vehicles, inflation-related price adjustments and cost discipline. As a result of inflation, the company expects to incur additional costs in 2023 of around 1.7 billion euro (Rs 14,939 crore) for materials, wages and salaries as well as energy and logistics. Continental is maintaining its outlook for 2023.
Nikolai Setzer, CEO, Continental said, “The good start to the year by our Tires group sector and the earnings performance of ContiTech are encouraging. Furthermore, Automotive’s earnings were up slightly, marking a strong improvement compared to the same quarter of last year. As we predicted, the group sector’s earnings in the first quarter were below our full-year forecast and are expected to increase as the year progresses.”
Katja Durrfeld, CFO, Continental said, “The negative free cash flow was caused by two main reasons: increased inventories to maintain our supply chains and a high level of receivables. We plan to reduce both over the course of the year. Free cash flow will therefore improve significantly as the year progresses, additionally supported by the increase in earnings. Overall, we started 2023 in line with expectations and are therefore maintaining our full-year outlook.”
The German company anticipates consolidated sales for fiscal 2023 of around 42 billion euro (Rs 369,096 crore) to 45 billion euro (Rs 395,460 crore) and an adjusted EBIT margin of around 5.5 to 6.5 percent. This includes additional costs of around 1.7 billion euro as a result of the price increases for materials, wages and salaries as well as energy and logistics. Adjusted free cash flow for the current year is expected to be around 0.8 billion euro (Rs 7,030 crore) to 1.2 billion euro (Rs 10,545 crore).
New business orders
The global production of passenger cars and light commercial vehicles weakened slightly compared to the fourth quarter of 2022 (Q4 2022: 21.9 million units) but increased year-on-year, according to preliminary figures. Compared with the first quarter of 2022, it rose by around 6 percent to 21.1 million units (Q1 2022: 19.9 million units).
For the year as a whole, Continental continues to expect the global production of passenger cars and light commercial vehicles to increase by 2 to 4 percent compared with the previous year’s figure of around 82.3 million vehicles.
Continental says for its Automotive group sector, sales increased by 18.1 percent to 5.0 billion euro (Q1 2022: 4.2 billion euro). With its sales growing organically by 17.1 percent before exchange-rate effects and changes in the scope of consolidation and global automotive production rising only by around 6 percent, the group sector again outperformed the market.
In addition, it has recorded a high volume in the Automotive group sector. This amounted to around 6.6 billion euro (Rs 58,000 crore), up 13.3 percent in the first three months of 2023 and included a major order in the Autonomous Mobility business area worth around 1.7 billion euro (Rs 14,940 crore) for 360-degree radar coverage from front, rear, side and long-range radars. They ensure the all-round monitoring of a vehicle’s surroundings, thus increasing road safety.
In addition, the Autonomous Mobility business area has also announced an exclusive partnership with Aurora Innovation. Together, the partners will bring autonomous trucking systems to the American market – as early as 2027. The system will be available to carriers and commercial fleet operators across the USA and will help reduce costs to facilitate broader adoption. Continental will contribute not only to the entire hardware system but also to a complete fallback system.
From May the ContiTech group sector is being strategically aligned with the aim of enhancing its impact and efficiency, and improving customer and market proximity. The group sector, which specializes in material applications, will step up its focus on expanding its industrial business. ContiTech will also consolidate its automotive original-equipment business to generate synergies.
With this realignment, ContiTech will create the conditions required for its development from a conventional product supplier to a provider of integrated solutions. The group sector also aims to respond in a more integrated manner than before to the constantly changing requirements of its customers in the various markets and industries.