Continental boosts earnings on higher pricing and lower inventories. Following successful price negotiations, fewer inventories, and stabilized supply chains, Continental (CONG.DE) posted results aligned with expectations on Wednesday. This allowed the company to improve free cash flow and the performance of its automotive sector.
The German multinational auto parts company raised its forecast for the tire business’s adjusted profit from 12–13% to 12.5–13.5% as higher prices offset a fall in sales in North America and Europe.
The business also stated that, contrary to its earlier prediction of 3-5% growth, it now projects that worldwide production of passenger cars and light commercial vehicles will increase by 5-7% this year.
Continental had difficulties in the second quarter due to rising freight costs, fluctuations in exchange rates, and a reduction in working capital. However, on Wednesday, the company reported results that were 7.1% higher than a year earlier at 637 million euros ($680.57 million).
To reach its adjusted free cash flow objective of 0.8–1.2 billion euros, a sharp increase from the 497.3 million loss reported thus far between January and September, it had managed to reduce inventory. It would continue to do so in the fourth quarter.
“We still have a lot of work to do in the fourth quarter,” stated Katja Garcia Vila, the former Dürrfeld chief financial officer.
With an adjusted profit margin of 2.8%, the automobile division—which had lost money in the second quarter—was back in the black, mainly due to pricing increases and supply chain stabilization.
Nevertheless, it had to modestly lower its forecast for auto sales, from 21 billion euros to 20 billion euros, due to unfavorable foreign exchange rates.
