Continental 's Net Sales Down By 10.9% To 9.8 Billion Euros In Q1 2019
Continental’s consolidate net sales amounted to €9.8 billion (Q1 2019: €11 billion), or 10.9 percent lower than in the previous year. In organic terms – before changes in the scope of consolidation and exchange-rate effects – sales also decreased by 10.9 percent. Adjusted EBIT fell to €432 million (Q1 2019: €884 million) and was thus about half as high as in the same period of the previous year. The adjusted EBIT margin was 4.4 percent (Q1 2019: 8.1 percent).
The company's sales and profits declined significantly in the first quarter. The primary reason for this was the production stop in China due to the coronavirus and the resulting impact. In the reporting period, the production of passenger cars and light commercial vehicles in China was down year-on-year by about 50 percent according to current estimates. Markets in Europe (about -20 percent) and North America (about -10 percent ) were also weak. At 17.3 million vehicles, global automotive production was down about 25 percent in the reporting period. In absolute figures, the global decline corresponds to about 5.7 million fewer vehicles produced in comparison to the previous year.
The second quarter is expected to be the weakest quarter of the current fiscal year for Continental with regards to sales and earnings, as this is when the impact of the coronavirus pandemic will really be felt in Europe and America. “We will feel the financial impact of the coronavirus pandemic even more strongly in the second quarter. Usually, we generate three-quarters of our sales in Europe and North America. But both regions have been hit hard by the effects of the coronavirus pandemic since the end of March, while automotive production in China is stabilizing again,” said Continental’s CEO Dr. Elmar Degenhart. In view of the current distribution, he underscored Continental’s intention to further balance out its revenues and to increase the proportion of its consolidated sales generated in Asia to 30 percent in the medium term.
As Continental announced at the end of April, the timing for a more detailed outlook for 2020 currently cannot be determined since the situation remains very dynamic. For the year as a whole, however, the DAX company is expecting sales and earnings to fall significantly short of the previous year’s figures.
Meanwhile, Continental further intensified its cost discipline in the first quarter. Projects and investments that are not urgently required have been postponed until further notice. For the current fiscal year, the company is striving to reduce its investments by at least 20 percent compared to the previous year. “The economic environment has again deteriorated substantially since the beginning of March as a result of the coronavirus pandemic, which has meant that we have intensified cost-cutting even further. We are scrutinizing the necessity of all expenditures and investments at present and looking for savings that will prove effective in the short term. This will be reflected to a greater extent in our figures from the second quarter onward. We are continuing to push ahead at full steam with key development projects as well as preparations for upcoming production start-ups,” explained Continental CFO Wolfgang Schäfer.
Irrespective of the current market situation, Continental is continuing to consistently pursue and implement its Transformation 2019–2029 structural program. “With our structural program, we are strengthening our competitiveness and viability in the long term. These are sustainable savings that will prove effective in the medium and long term,” said Degenhart.
As announced at the beginning of March, further measures are currently being assessed in view of the growing deterioration of the markets, which could continue in the medium term. Continental will provide additional information in due course.
