Rising costs prompt Conti to downgrade business outlook

Hanover, Germany – Continental AG has pared down its expectations for growth in global passenger car and light commercial vehicle production to between 4% and 6% year-on-year in 2022 - from a 9 March forecast of 6-9%.

The downgrade, posted 21 April, reflected cost inflation for oil-based raw materials as well as for energy and logistics – particularly for its Tires and ContiTech businesses.

Group-wide, Continental predicted consolidated sales of around €38.3-40.1 billion – previously: €38-40 billion – and an adjusted EBIT margin of 4.7-5.7%, down from a previous 5.5-6.5%.

For the Tires group sector, sales are now expected to be around €13.8-14.2 billion – previously €13.3-13.8 billion – with adjusted EBIT margin to come in 12.0-13.0%, compared to 13.5-14.5% previously.

The adjusted EBIT margin range assumes a year-on-year increase in procurement and logistics costs of around €1.9 billion, compared to around €1 billion projected in March.

For ContiTech, Continental expects sales of around €6.3-6.5 billion compared to around €6.0-6.3 billion and an adjusted EBIT margin of around 6.0-7.0%, down from 7.0-8.0% before.

The adjusted EBIT margin range assumes a year-on-year increase in procurement and logistics costs of around €600 million, compared to the previously projected €300 million.

Continental went on to warn that if the situation in eastern Europe “remains tense or worsens it could result in further lasting consequences for production, supply chains and demand.”

Further negative effects could arise as a result of the ongoing Covid-19 pandemic and related supply-situation issues, the Hanover-based group also pointed out.

“Depending on the severity of the disruption, this may result in lower sales and especially earnings in all group sectors as well as for the Continental Group compared to the prior year,” it concluded.