Conti sees solid growth prospects ahead for Tires business

Hanover, Germany – Continental AG has set out a series of strategic targets within its medium-term strategy, unveiled during a 4 Dec capital markets day event.

Overall, Continental aims to achieve sales of between €51 billion and €56 billion over the next three-to-five years and an adjusted earnings (EBIT) margin of around 8% to 11%.

The targets mark a significant step-up from the sales of €39.4 billion and an adjusted earnings margin of 5% reported by the Hanover group for 2022.

Among its business segments, Continental said it expects its Tires group sector to continue delivering “profitable growth and exceptional value-creation.”

Over the mid-term, the Tires business is expected to achieve annual sales of between around €17 billion and €18 billion and an adjusted earnings margin in a range of around 13-16%.

For 2022, the German-based group's Tires sector posted sales of around €14 billion and an earnings margin of 13.1%.

According to Continental, the Tires group sector has increased its sales by an average of 4.3% annually over the last five years.

The performance was supported by “operational efficiency,” Continental saying the unit "continually adapted its capacity and production technologies to market requirements [leading to] major economies of scale and scope.”

This strategy, it added, resulted in more than 80% of the group sector’s global production capacity being bundled in so-called 'megafactories'.

Over the medium-term, Continental expects megatrends such as sustainability, e-mobility and digitalisation to offer a wide range of opportunities for further profitable growth in the Tires group.

Furthermore, Continental expects a recovery of the current weak demand, particularly in the European tire-replacement business as well as “continuous increases in efficiency” to help margins within the tire segment.

The ongoing trend toward larger and higher-performing tires as well as cost-discipline in the sector will further contribute to higher earnings, added the group statement.

In particular, the Continental's Tires business foresees strong growth potential in the Asia-Pacific and North and South America regions.

Summarising Continental's group-wide strategy, CEO Nikolai Setzer said the goal is to "increase our value-creation. This will allow us to continue to develop into the mobility and material technology group for safe, smart and sustainable solutions.” 

“There are good reasons to invest in Continental," he continued. "We have a clear strategy to achieve our mid-term targets.

"We will invest specifically in those areas with value creation upside and expand our technology position wherever this gives us an edge over the competition.”