Continental is withdrawing its outlook for the current fiscal year due to the uncertainty regarding the duration of restrictions caused by the coronavirus pandemic and related possible consequences for production, the supply chain and demand.
Timing for the 2020 outlook currently cannot be determined since the situation remains “very dynamic,” says the German supplier.
Previously, Continental had anticipated consolidated sales for the current year of around EUR42.5bn (US$46bn) to EUR44.5bn and an adjusted EBIT margin of around 5.5% to 6.5%.
At the same time, the technology company published its preliminary business figures for the first quarter. Based on these figures, Continental expects to achieve in the first three months of the year consolidated sales of around EUR9.4bn to EUR9.8bn and an adjusted EBIT margin of around 2% to 3%.
In the Automotive Technologies group sector together with the former Powertrain division, sales of around EUR5.7bn to EUR5.9bn and an adjusted EBIT margin of around 7% to 8% are expected.
“In periods of crisis, financial liquidity is of top priority,” said Continental CEO, Elmar Degenhart. “To this end, we are cutting our costs, optimising our working capital and postponing projects and investments not urgently required until further notice.
“We are, however, continuing to push ahead at full steam with key development projects as well as preparations for upcoming production start-ups. In this way, we are maintaining our ability to function effectively and confidently.”
At present, more than 40% of Continental’s 249 production locations worldwide have temporarily ceased activities for a few days to several weeks in order to protect employees and in response to the drop in demand.
The consequences are reflected in reduced working hours. In Germany alone, about 30,000 employees and thus half of the current workforce have been registered for short-time work as at 1 April, 2020. This affects all corporate functions – from production and research and development through to administration, including employees at Continental’s headquarters in Hanover. Certain business units already started reducing working hours in mid-March 2020.
“Our most urgent goal is to further reduce the cash outflow substantially in light of the challenging market development,” added Degenhart.
“The numerous steps we have taken are in line with the respective market requirements and the regulations issued by local authorities. We are also coordinating with employee representatives.”