The Continental logo hangs on the new headquarters behind a one-way street sign: The numbers are bad.
(Photo: Melissa Erichsen/dpa)
Increased costs and numerous special effects have pushed the automotive supplier Continental surprisingly deep into the red. The bottom line is that the Dax group reported a loss of 251 million euros for the second quarter on Tuesday, after a profit of 545 million a year ago. Analysts had expected a profit for the quarter. The Conti share then went down. The company from Hanover is one of the largest automotive suppliers, with around 190,000 employees and 2021 sales of almost 34 billion euros.
“The current headwind is hurricane-like and will not subside in the short term,” said CFO Katja Dürrfeld. For the second half of the year, Continental expects supply chains to stabilize and semiconductors to be more readily available. Auto production will increase. Despite the impending gas shortage, management assumes that the energy supply in Europe and Germany will remain stable. “We are not satisfied with the current result – even if we expected it to be so,” said Dürrfeld, looking at the loss.
More premium tires are to be sold in the future
The group has taken numerous measures to reduce costs and stabilize supply chains. This includes the distribution of purchasing across several sources, the creation and maintenance of safety stocks and holistic control of the procurement and logistics chain in the electronics sector. Price negotiations with customers are conducted with the aim of jointly bearing the costs, which is likely to mean price increases. Furthermore, Conti is concentrating on the business with technologically sophisticated products, from which the group earns more. For example, the share of premium tires in sales is increasing.
Another serious problem for the group: Natural gas represents a significant part of Continental’s energy mix, it said. However, a reliable energy supply is an indispensable basis for stable economic conditions. We are therefore closely monitoring the current situation. The indirect effects of a massive gas shortage would be significantly higher than the direct effects at Continental production sites. Conti pointed out that supplier industries such as the chemical industry would be more affected. Loss of production there could also lead to delivery bottlenecks in the automotive industry.
Continental cited the price increases for raw materials, energy and logistics triggered by the Ukraine war as well as the lack of electronic components and the corona lockdowns in China as the reason for the significant net loss. In addition, the automotive supplier was burdened by numerous special effects that add up to more than half a billion euros. The Lower Saxony had already published preliminary operating figures for the second quarter on July 20th and also confirmed their forecast for the year as a whole. According to this, group sales should increase to between 38.3 and 40.1 billion euros. Conti operates a tire plant in Russia and has resumed production after an initial hiatus. However, the management is considering a complete withdrawal from the country. In total, the Dax group employs around 1,300 people in Russia.