Tires Guarantee Continental Profits

2023 Author: Eric Donovan | [email protected]. Last modified: 2023-11-27 05:39

For years, Continental has wanted to free itself from the dependency of the tire division. The fact that the tire business is generating “almost dream margins” does not make those responsible angry.

Despite all efforts to be more independent from the tire business, the tires once again determined the balance sheet at Continental. In the first half of the year, the tire division of the automotive supplier generated more than every second euro of operating profit, as the interim balance presented on Wednesday shows. In the second quarter, both the profitability of tires and their share in the Group's total operating profit increased again slightly. And: Rising new car registrations and consistently low raw material prices, for example for rubber, keep things going; Conti raises the forecast.

The Dax group from Hanover has been striving for years to alleviate its dependence on business with the car manufacturers; about the expansion of the industrial division. Nevertheless: The rubber determines the well-being and woe.

Interior division collapses

This is clearly shown by the half-year figures: The Interior division, which supplies multimedia units for vehicles, for example, has problems: In a half-year comparison, earnings before interest and taxes (EBIT) fell by 22 percent. The second quarter was even worse with a 26 percent decline. Car models with interior technology expired and development costs rose. Conti's CFO Wolfgang Schäfer said the turnaround was in sight: by the end of the year, Interior should grow and earn as usual again. In view of the dominance of tires, the problems are hardly noticeable overall.

The tires increased their EBIT in the second quarter by 7 percent to 645.4 million euros. In the first half of the year, the key figure even showed a double-digit increase of 11 percent to 1.18 billion euros. NordLB industry analyst Frank Schwope called this “almost dream margins”.

Sluggish electromobility

Electromobility, which is still sluggish, is also weighing on the Conti figures: business with technology for hybrid drives was worse than a year earlier, and sales shrank. But Schäfer has been paying more attention to alternative drives since the emissions scandal. The manufacturer's interest in hybrids has since "increased significantly". But the road is long: in five years, he expects a share of pure electric cars in new registrations of 2 to 3 percent worldwide. For hybrid vehicles it could then be 12 percent.

The VW- The exhaust gas affair also poses new challenges for diesel. Foreseeable stricter environmental regulations are causing problems, especially in small cars: Larger exhaust systems such as catalytic converters require more space and are a burden on the narrow margin of small cars. Schäfer said: "I would not rule out that in the medium term we will see a certain shift away from diesel and towards gasoline, especially in the smaller and lower middle segments."

Conti profit increases by 12 percent

Conti's group sales grew by 2 percent to a good 20 billion euros in the first six months. The bottom line was that profits after interest and taxes rose by 12 percent to almost 1.7 billion euros. In the current year, the EBIT margin adjusted for special effects such as acquisitions is to increase to “greater than 11 percent” instead of the previous “around 11 percent”. Conti wants to keep more than 11 euros out of 100 euros in sales before interest, taxes and one-off effects. It is the second forecast increase in a row.

Without its trainees, Conti now has 215,000 employees worldwide; that's about 10,000 more than a year ago. (dpa)