HANNOVER (dpa-AFX) - Automotive supplier and tire manufacturer Continental performed better in the first quarter despite the sluggish industry situation. Business developed significantly better, particularly in the automotive supply division, which is being spun off. Special accounting rules also contributed to this. However, even adjusted for this effect, the DAX-listed company performed better than expected. Cost reductions through job cuts had a particularly positive impact. Conti is taking a more cautious view of the industry, however, and the company is still unable to estimate the potential impact of US tariffs. Nevertheless, Conti shares rose.
The stock climbed 1.20 percent to 70.94 euros in morning trading. At its peak, it even rose to more than 73 euros, its highest level in more than a year. The setback caused by the flood of US tariffs at the beginning of April has been overcome. Analyst Michael Aspinall spoke of a strong start to the year for automotive suppliers in terms of profitability. The expert also referred to details of the tariff situation between the US and Mexico. However, the plastics technology division Contitech performed weaker than expected.
The Hanover-based company's operating profit, adjusted for special items, amounted to €639 million, more than three times higher than in the same quarter last year, as the group announced on Tuesday. This was due to the fact that Conti reports automotive supplies as a discontinued operation following the decision to spin off this business. In accordance with accounting rules (IFRS 5), no write-downs for the business to be divested have been recognized in the remaining group since the spin-off decision.
Even without this effect, however, the situation in the largest business segment in terms of sales improved significantly. A year earlier, Conti had posted deep red figures here. The operating margin would have risen from minus 4.0 percent to plus 1.6 percent if the write-downs had continued as before. Experts had only expected a figure slightly above the break-even point.
Conti had announced a cost-cutting program in its automotive supply division that would involve the elimination of over 10,000 jobs, most of which have now been cut. The administrative department is affected, and savings are also to be made in research and development. The division often had to be co-financed by the profitable tire business in the past, but is to be floated independently on the stock exchange in September and made fit for this.
Adjusted for exchange rates and consolidation effects, the brake, electronics, and other automotive components business achieved a slight increase in sales. This was despite an overall decline in global production of cars and light commercial vehicles, on which Conti is heavily dependent in this division. There was a sharp rise in car production in China, but the downturn continued in North America and especially in Europe.
For Conti, the global situation has also deteriorated again after the first few months. The Group is now assuming that global car production will remain largely stable this year, ranging from minus to plus one percent. Now, up to three percent fewer cars are likely to roll off manufacturers' assembly lines in 2025. Even in the best-case scenario, the industry is likely to see a decline of only one percent.
Given the dynamic situation, the group cannot accurately quantify the specific effects of increased US tariffs on its own business figures, said CFO Olaf Schick in an interview with the financial news agency dpa-AFX. The effects are being continuously assessed. Production relocations would have to be coordinated with customers. Special working groups within the group are working on improving the supply chains.
Conti's automotive parts division imports more than half of its goods from Mexico to the US. According to the company, almost all of these parts meet the requirements of the North American Free Trade Agreement and are therefore exempt from the specific 25 percent tariffs on automotive parts.
The situation is different in the tire sector: Conti manufactures a good 40 percent of the tires sold there for cars and light commercial vehicles locally, and more than 90 percent in the truck sector. Imports come mainly from Europe and are therefore subject to tariff increases imposed by US President Donald Trump. He had imposed a general reciprocal import tariff of 10 percent on all goods.
Consolidated sales for the first three months of the year fell by 0.8 percent to 9.7 billion euros. Net profit was 68 million euros. A year earlier, Conti had reported a loss of 53 million euros.
CEO Nikolai Setzer confirmed the sales and margin forecasts for the individual business areas. Due to the planned spin-off of the automotive supply division on the stock exchange, Conti is now formulating its targets for the rest of the group, consisting of the tire business and plastics technology, and separately for the automotive components business that is to be spun off. However, the outlook does not take into account any potential burdens from future tariffs and further trade restrictions.
For the remaining Conti Group, management is now targeting sales in the range of €19.5 to €21 billion, with an operating margin (adjusted EBIT) of 10.5 to 11.5 percent.
In the Automotive division, which is to be listed separately on the stock exchange in September under the name Aumovio, sales are expected to remain at €18 to €20 billion and the operating margin at 2.5 to 4.0 percent./men/mis/jha/
