Half-Year Figures: Continental Accelerates its Growth

Sales growth was up in particular in the Powertrain division in the second quarter. “Our future alignment is paving the way for Powertrain as well as the other divisions to continue to outpace our relevant markets in the future as well, as part of our values alliance for top value creation,” he said, making reference to the recently announced realignment of the company.

Degenhart was also pleased with the quarterly results of the Tire division, which had been impacted by exchange-rate effects in the first three months. Its adjusted EBIT rose from 15.2 percent in the first quarter to 17.8 percent in the second quarter. “Our tire business was back up again in the second quarter, maintaining its profitable position on the global market,” said Degenhart, summing up the positive development.

After the first six months, net income attributable to the shareholders of the parent rose by 4.3 percent to around €1.6 billion, after €1.5 billion in the same period of the previous year.

Free cash flow in the first half of 2018 amounted to €122 million, after €292 million in the first half of last year. This was mainly due to the increase in working capital as a result of the solid growth. Free cash flow before acquisitions amounted to €296 million after six months.

The Automotive Group increased its sales by 2.8 percent in the past half-year. Organic growth was 6.6 percent. Sales amounted to €13.8 billion in this period. The adjusted EBIT margin was 8.1 percent.

In the first six months, the Rubber Group achieved sales of €8.6 billion, down slightly year on year. There was organic growth of 3.6 percent in the first half of 2018.

In the first half of the year, Continental invested €1.2 billion in property, plant and equipment, and software. This corresponds to a capital expenditure ratio of 5.2 percent (previous year: 5.3 percent). The technology company’s net expenditure for research and development was €1.7 billion, which equates to 7.7 percent of consolidated sales. In the same period of the previous year, the ratio was 7.2 percent.

As at June 30, 2018, net indebtedness was just short of €2.9 billion, up €811 million from the end of 2017. The increase in net indebtedness in the period under review is due mainly to the payment of the dividend for the last fiscal year totaling €900 million.

The gearing ratio, which is an indicator of indebtedness, rose accordingly from 12.6 percent at the end of 2017 to 16.8 percent as at the reporting date. Continental had liquidity reserves totaling 5.8 billion as at the reporting date.

At the end of the first half of 2018, Continental had more than 243,000 employees. This equates to about 8,000 additional employees compared to the end of the year. Nearly two-thirds of the growth was due to staff increases in the global R&D team and higher production volumes in the Automotive Group. About one-third of the additional staff was hired in the Rubber Group. These employees are required primarily for the expanded production operations and the growing distribution network.

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Looking ahead to the remainder of the year, Schaefer pointed out that the third quarter is traditionally impacted by seasonal effects: “Carmakers close down plants for vacation in the third quarter. Furthermore, next quarter will probably be negatively impacted by the new test procedure WLTP.” At present, Continental is expecting a strong quarter at the end of the year, and is therefore confirming its outlook for the full business year.