Continental Delivers Solid Operational Performance in Weak Market Environment

One example of Continental’s strong expertise in software and electronics is the In-Car Application Server (ICAS1), which condenses a large number of today’s control units into a small number of high-performance computers. With this new vehicle architecture, Continental is paving the way for a seamless connection between vehicles and the digital world of mobile services and data, making over-the-air updates the norm in the future. ICAS1 enables the seamless integration of data-based apps and functions – such as planning routes optimized for vehicle range and locating charging stations for electric cars. “With ICAS1, we are supplying the heart of a new electronic server architecture. We are delighted to have gained Volkswagen and its ID. series as our first customer,” said Degenhart. Volkswagen, which is Europe’s largest automotive manufacturer, will thus be using ICAS1 technology for its future ID. electric vehicles, including the Volkswagen ID.3, which recently went into production.

In the third quarter, the production of passenger cars and light commercial vehicles in China was down by more than 5 percent year-on-year, whereas it was nearly on par with the prior-year figures in Europe and North America.

The company, however, anticipates that production rates will continue to decline in the fourth quarter in these three key regions. For the year as a whole, Continental expects the decline in the global production of passenger cars and light commercial vehicles to be about 6 percent year-on-year.

Please find here the key figures for the Continental Corporation - pdf (51KB)

In the third quarter, free cash flow – before acquisitions and including the effects from the accounting of leases (IFRS 16) as well as the effects of transforming the Powertrain division into an independent legal entity – was €343 million (previous year: €74 million, before the net outflow for the funding of the U.S. pension plans). In light of the regular seasonality and thus a fourth quarter traditionally characterized by a very strong cash inflow, the company is forecasting for the entire year a continued free cash flow before acquisitions of between about €1.2 billion and €1.4 billion before carve-out effects.

Despite the decline in global automotive production, the Automotive Group increased its sales by 2.2 percent year-on-year in the third quarter. Business performance was stable in organic terms. Sales during this period totaled about €6.6 billion. The adjusted operating margin was 1.6 percent (previous year: 4.0 percent). This includes the provisions announced in July 2019 for warranty claims in the amount of €187 million, which were incurred primarily by the Powertrain division.

Please find here the key figures for the core business areas - pdf (52KB)

The Rubber Group generated total sales of about €4.6 billion in the third quarter, which equates to growth of 3.9 percent compared with the same period of the previous year. Organic growth for the third quarter of 2019 came to -0.6 percent. The adjusted EBIT margin was 12.3 percent, which is about the same level as in the previous-year period (previous year: 12.5 percent).

With regard to the stable trend for the Rubber Group in the third quarter, Schäfer commented: “We have been focusing for a long time on boosting our industrial and end-customer business. This makes us more independent from the trends on the international automotive markets. A prime example is the acquisition of the Merlett Group, a thermoplastics specialist based in Italy, which we completed at the beginning of November.”

With this acquisition, Continental is expanding the materials expertise of its industrial hose business in the ContiTech division, its industrial specialist. The aim is to offer increasingly intelligent applications with the aid of thermoplastic materials in the future, for example by means of sensors.

In the first nine months of the year, Continental’s capital expenditure on property, plant and equipment, and software totaled €2.2 billion. This put the capital expenditure ratio at 6.6 percent (previous year: 5.9 percent). The technology company’s net expenditure for research and development was about €2.7 billion, corresponding to 8.0 percent of consolidated sales. The figure for the same period of the previous year was 7.6 percent.

As at September 30, 2019, net indebtedness was about €5.5 billion. This represents a decline of about €200 million compared to the end of the second quarter of 2019, when it totaled around €5.7 billion. The gearing ratio, which quantifies the degree of indebtedness, was 34.3 percent on the reporting date. Continental’s liquidity reserves amounted to about €5.3 billion on the reporting date of the period under review.

As at the end of the third quarter of 2019, Continental had 242,516 employees, representing a decline of 710 in comparison to the end of 2018. Adjustments were made primarily in the Automotive Group in response to lower global vehicle production. This was countered by the acquisitions of antenna specialist Kathrein Automotive and anti-vibration specialist Cooper-Standard.

Click here for the financial report as at September 30, 2019 of the Continental corporation.

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