Continental says it accelerated its sales growth in the third quarter of 2016. However, the quarter was characterised by several isolated and unrelated circumstances in the Automotive divisions that had a negative impact on earnings.

“The sales growth in our automotive business gained momentum in the third quarter. With organic growth of over 6%, we once again grew faster than the market with our solutions for safe, efficient and intelligent driving,” said Dr. Elmar Degenhart, Continental’s chairman of the Executive Board, at the presentation of the business figures for the first nine months of the year on Thursday. This growth momentum is also reflected in the order intake in the Automotive Group, with orders for electronics, sensors, software and other components climbing by 15% year-on-year to EUR25bn over the respective life time.

With organic growth of 4% in the first nine months, the Rubber Group also continued its growth trajectory, albeit at a slower pace.

EBIT after nine months increased to a total of EUR2.9bn. As reported on 17 October 2016, it was negatively impacted by several isolated events in the third quarter. Warranty cases, pending antitrust proceedings and increased research and development expenses resulted in a negative effect on the reported and adjusted EBIT of the three Automotive divisions for the current year amounting to around EUR480m. In the third quarter alone, these isolated events had a negative impact of EUR450m on the Automotive Group’s earnings.

The technology company however anticipates strong earnings in the final quarter of 2016.

Free cash flow before acquisitions after the first nine months of 2016 amounted to more than EUR1.3bn and was thus EUR209m lower than in the previous year. “Free cash flow before acquisitions decreased compared to the previous year only due to the year-on-year rise in capital expenditure of EUR288m. We are using these investments to increase our capacity for growth in the years ahead,” explained CFO Wolfgang Schäfer.

As at 30 September 2016, net indebtedness was down significantly by EUR998m compared to the previous year. Compared to 31 December 2015, it was down by EUR244m. “The gearing ratio after nine months was 24.3% after 33.9% at the same point of the previous year. Our equity ratio is 38.8%. Continental’s financial strength was recently reconfirmed by the rating agencies,” said Schäfer. Fitch recently upgraded its rating for Continental to BBB+.

As at the end of the third quarter of 2016, Continental had liquidity reserves totalling EUR5.1bn, consisting of cash and cash equivalents of EUR1.4bn and committed, utilised credit lines totalling EUR3.7bn.

Net interest result improved by EUR144m year-on-year to EUR74m in the first nine months of 2016. “Owing to the interest and exchange rate development, we now anticipate the net interest result to total less than EUR170m for the year as a whole, after previously having expected it to be better than EUR250m,” Schäfer explained.

In the first three quarters, Continental invested EUR1.6bn in property, plant and equipment, and software. As a result, the capital expenditure ratio amounted to 5.3% after 4.5% in the comparative period of the previous year. After the first three quarters of 2016, research and development expenses increased to 7.2% of consolidated sales after 6.5% in the comparative period of the previous year. In a technological environment undergoing a structural transformation, Continental is laying the foundations for the company’s growth in the coming years.

On 30 September 2016, the corporation had more than 218,000 employees. This represents an increase of 10,700 compared to the end of 2015. The number of employees in the Automotive Group has risen by almost 7,900 since the beginning of the year as a result of increased production volumes and expansion of research and development. In the Rubber Group, further expansion of production capacity and sales channels led to an increase of more than 2,800 employees.

In the first nine months of this year, the Automotive Group achieved sales of EUR18.1bn. The adjusted EBIT margin amounted to 5.7% as a result of the isolated events described above.

In the first three quarters of 2016, the Rubber Group generated sales of EUR11.9bn and improved the adjusted EBIT margin to 17.9%.