Conti points to 'better prospects' after Tires, ContiTech declines

Hanover, Germany – Continental AG expects a “significantly better” second quarter for its Tires business, following a “weak start” to the year.

The Tires group sector generated sales of €3.3 billion during the three months to 31 March, down 5% on the same quarter of last year, Continental reported 8 May.

Tires' segment earnings (EBITDA) fell 13.6% year-on-year to €570 million, while EBIT margin dropped from 13.4% in the first quarter of 2023 to 11.7% this year.

Continental linked the declines to “weak markets” in the truck and OE tire sectors, leading to a 1.9% decline in volumes.

Foreign exchange rates also had a 2.5% negative impact on sales, compounded further by fewer working days in March due to the Easter holidays.

Earnings, Continental commented, were ‘burdened’ by foreign exchange effects and lower volumes as well as a negative effect from ‘cost indexation’.

Meanwhile, pressure from raw materials costs eased during the quarter, though the group also noted a ‘labour-cost inflation headwind’.

Continental’s industrial and materials arm ContiTech reported a 4.8% year-on-year drop in sales to €1.6 billion, reflecting a 1% negative impact from currency exchange and lower demand.

Here, Continental noted that demand was “significantly down” in both industrial and automotive businesses, especially in Europe.

Segment earnings declined 14.5% to €147 million during the quarter, due mainly to negative volumes, particularly in industrial sector “causing unfavourable mix effects”.

In addition, Continental noted that the OE Solutions (OESL) business area – which makes up a large part of ContiTech’s business with automotive manufacturers – does not expect improvement until the second half.

Labour-cost inflation was an “additional burden”, said the German group, as ContiTech's EBIT margin dropped from 6.5% last year to 5.4% this year.

Turning to full-year prospects, the German group forecast a pick-up in its business performance, stating that the first quarter “will be our weakest this year.”

As the year progresses, Continental CEO Nikolai Setzer expects to “see improvements across the three group sectors Automotive, Tires and ContiTech.”

“In the months ahead, the Tires group sector will benefit from an expected increase in demand,” the group's statement added.

“We are on track with the implementation of our measures to achieve our mid-term targets and in 2024 we will be taking another step forward,” concluded Setzer.