Third Quarter: Continental Increases Automotive Earnings and Adjusted Free Cash Flow

• Consolidated sales of €10.2 billion (Q3 2022: €10.4 billion, -1.5 percent) • Adjusted EBIT of €637 million (Q3 2022: €595 million, +7.1 percent) • Adjusted EBIT margin of 6.2 percent (Q3 2022: 5.7 percent) • Net income of €299 million (Q3 2022: -€211 million End Quote

(1888PressRelease) November 10, 2023 - Continental ended the third quarter of 2023 in line with expectations. The technology company significantly improved the operating result in its Automotive group sector compared with the first half of the year. This was thanks to price adjustments, high cost discipline and stabilized supply chains. Furthermore, it increased its adjusted free cash flow year-on-year as well as compared with the first two quarters of 2023. This was due primarily to a reduction in inventories. The company has adjusted its sales outlook for the Automotive group sector – mainly because of ongoing negative exchange-rate effects – and its outlook for consolidated sales. It has also slightly raised its adjusted EBIT margin outlook for Tires due to the group sector’s good earnings.

“We ended the third quarter in line with our expectations. Our earnings were good in Tires and stable in ContiTech, and we made progress in Automotive, significantly increasing its earnings compared with the first half of the year. We will build on this in the fourth quarter and continue to improve,” said Continental CEO Nikolai Setzer on Wednesday in Hanover, Germany.

In the third quarter of 2023, Continental achieved consolidated sales of €10.2 billion (Q3 2022: €10.4 billion, -1.5 percent). Its adjusted operating result was €637 million (Q3 2022: €595 million, +7.1 percent), corresponding to an adjusted EBIT margin of 6.2 percent (Q3 2022: 5.7 percent).

Net income in the third quarter increased to €299 million (Q3 2022: -€211 million). Adjusted free cash flow was €466 million (Q3 2022: -€496 million).

“We have also made progress in terms of adjusted free cash flow. But, as in the previous year, we still have significant ground to gain in the fourth quarter. Our focus is on increasing our earnings and further reducing inventories and receivables in order to achieve an adjusted free cash flow of around €0.8 billion to €1.2 billion by the end of the year,” said Continental CFO Katja Garcia Vila (formerly Dürrfeld).
Automotive production around same level as second quarter of 2023
According to preliminary figures, the global production of passenger cars and light commercial vehicles amounted to around 22.3 million units in the third quarter of 2023. This was around the same level as the previous quarter (Q2 2023: 22.2 million units) and around 4 percent higher year-on-year (Q3 2022: 21.5 million units).
Market outlook and forecast for fiscal 2023 adjusted
For 2023, Continental expects production of passenger cars and light commercial vehicles to increase by 5 to 7 percent year-on-year (previously: 3 to 5 percent). For the global tire-replacement business, the technology company expects sales volumes to develop by -2 to 0 percent.
Continental has adjusted its sales outlook for the Automotive group sector, mainly because of ongoing negative exchange-rate effects. Continental now expects sales in the Automotive group sector of around €20.0 billion to €21.0 billion (previously: €20.5 billion to €21.5 billion) and consolidated sales of around €41.0 billion to €43.0 billion (previously: €41.5 billion to €44.5 billion).
Furthermore, the Tires group sector performed well, despite declining European and North American markets in the tire-replacement business. Continental has therefore slightly raised its adjusted EBIT margin outlook for this group sector. For Tires, it now expects an adjusted EBIT margin of around 12.5 to 13.5 percent (previously: 12 to 13 percent).
Key figures for the Continental Group
January 1 to September 30 Third Quarter
€ millions 2023 2022 Δ in % 2023 2022 Δ in %
Sales 30,972.2 29,118.0 6.4 10,240.1 10,395.6 -1.5
EBITDA 2,990.0 2,859.5 4.6 1,000.0 1,078.7 -7.3
in % of sales 9.7 9.8 9.8 10.4
EBIT 1,368.5 222.9 514.1 460.7 12.2 3,676.1
in % of sales 4.4 0.8 4.5 0.1

Net income attributable to the shareholders of the parent1 889.4 -222.0 298.6 -210.8
Basic earnings per share in €1 4.45 -1.11 1.49 -1.05
Diluted earnings per share in €1 4.45 -1.11 1.49 -1.05

Adjusted sales2 30,881.6 29,069.3 6.2 10,213.5 10,370.3 -1.5
Adjusted operating result (adjusted EBIT)3 1,712.9 1,424.4 20.3 637.4 595.3 7.1
in % of adjusted sales 5.5 4.9 6.2 5.7

Research and development expenses (net)4,5 2,271.4 2,188.9 3.8 723.5 734.9 -1.6
in % of sales4,5 7.3 7.5 7.1 7.1
Capital expenditure6 1,526.0 1,545.2 -1.2 585.7 557.7 5.0
in % of sales 4.9 5.3 5.7 5.4

Adjusted free cash flow -497.3 -1,356.7 466.3 -496.0

Net indebtedness as at September 30 5,714.8 6,025.4 -5.2
Gearing ratio in %1 39.2 40.8

Number of employees as at September 307 203,593 197,442 3.1

1 The methodology used in the consolidated financial statements for the recognition of uncertain tax positions has been changed. For more information, see Note 2 (General Information and Accounting Principles) of the notes to the consolidated financial statements in the 2022 annual report. The comparative period has been adjusted accordingly.

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