Continental Cancels 2020 Outlook

Continental is withdrawing its outlook for the current fiscal year due to the uncertainty regarding the duration of restrictions caused by the coronavirus pandemic and the related possible consequences for production, the supply chain and demand. As announced by the company in a mandatory disclosure, the timing for a new outlook for 2020 currently cannot be determined since the situation remains very dynamic. Previously, Continental had anticipated consolidated sales for the current year of around €42.5 to €44.5 billion and an adjusted EBIT margin of around 5.5 to 6.5 percent.

At the same time, the technology company published its preliminary business figures for the first quarter. Based on these figures, Continental expects to achieve in the first three months of the year consolidated sales of around €9.4 to €9.8 billion and an adjusted EBIT margin of around 2 to 3 percent. In the Automotive Technologies group sector together with the former Powertrain division, sales of around €5.7 to €5.9 billion and an adjusted EBIT margin of around 0 percent are expected. In the Rubber Technologies group sector, sales of around €3.7 to €3.9 billion and an adjusted EBIT margin of around 7 to 8 percent are expected.

The consequences are reflected in reduced working hours. In Germany alone, about 30,000 employees and thus half of the current workforce have been registered for short-time work as at April 1, 2020. This affects all corporate functions – from production and research and development through to administration, including employees at Continental’s headquarters in Hanover. Certain business units already started reducing working hours in mid-March 2020.  

Pointing out the company’s ample liquidity reserves (as at February 29, 2020: cash and cash equivalents of around €2.3 billion and unused committed credit lines of around €4.6 billion), Degenhart added: “We are strong and remain confident. After all, we have a crisis-tested team and a sound balance sheet. And that is why we will master this crisis successfully.”

Continental’s Executive Board has therefore decided to voluntarily forego 10 percent of its monthly income for the month of April. A large number of executives are already foregoing parts of their salary and are contributing a similar amount on average.

In some countries, as in Germany, the Executive Board will soon be calling upon executives to similarly demonstrate their voluntary solidarity. Degenhart commented: “Many members of the global Continental team are currently doing short-time work, or are having to accept salary cuts or other restrictions. We are therefore asking our executives worldwide for their solidarity and personal support. As the Executive Board, we wish to set an example and are foregoing 10 percent of our basic salary for the month of April. We are asking all executives who have not yet done so to follow our lead and make an equal financial contribution on their part. This will demonstrate how resolutely united we are in critical times and how we will mutually strengthen one another for the future.”

The cutback in production affects, in particular, Continental’s locations in Europe as well as in North and South America. In China, the company halted production at its plants after the outbreak of the coronavirus in compliance with local regulations. Continental has gradually resumed production there starting February 10, 2020.

Certain production lines will continue to be operated at Continental locations worldwide so that the company can fulfill its delivery obligations. In addition, products that are vital for industries crucial to people’s needs, such as medical technology (for instance hoses), water works, the food industry or public utilities, will still be produced in many plants of the ContiTech business area.

Continental is protecting its employees in ongoing production with appropriate equipment as specified in its corporate-wide pandemic plan and in compliance with the protection regulations of individual countries. Extensive protection schemes minimize the risk of infection at the respective locations.