just-auto.com

Continental Q2 net income down 41% to EUR485m

By Simon Warburton | 8 August 2019

Continental has posted second-quarter net income attributable to the shareholders of the parent down 41% to EUR484.8m (US$544m).

Consolidated sales were down 1% to EUR11.3bn, while adjusted EBIT in the second quarter amounted to EUR868m.

Sales of the Automotive Group fell in the last quarter by 3.1% to EUR6.8bn compared to the same period of the previous year. Organic growth amounted to -4.9%.

In the same period, the production of passenger cars and light commercial vehicles declined by around 7%. Adjusted operating margin of the Automotive Group was 5.5%.

"The current market environment is highly challenging," said Continental CEO, Elmar Degenhart. "The key automotive markets of Europe, North America and particularly China are declining.

"We are responding to the declining market by ensuring rigorous cost discipline and enhancing our competitiveness."

Continental's board has also decided on the next steps for its powertrain business, which in the future will trade using the name Vitesco Technologies.

"We are aligning our powertrain operations consistently toward this since the market is clearly moving in this direction," added Degenhart.

"We benefit from the fact we have long been a technological leader with broad systems experience in this area.

At the same time, Continental has ended considerations of entering into the production of solid-state battery cells. Until now, the company had not yet made a final decision in this regard. 

After analysis, Continental concluded it would not invest in the production of battery cells. The technological direction of energy storage for electric mobility is being determined in particular by political targets.

The expansion of electric mobility must now occur at an accelerated rate with the help of lithium-ion battery cells. According to Degenhart, the cell production market for the automotive industry is thus going to be divided up among suppliers at a much earlier stage on the basis of this established technology, which is one of the reasons for the decision which has now been made.

"The course has therefore been set," he said. "Continental can no longer set up an attractive business model with the solid-state technology which will probably not be available until after 2030."

The rapidly changing market is accompanied by falling demand for combustion engines, which has prompted Continental to cease further expansion of its hydraulic components business. This includes the business in injectors and pumps for gasoline and diesel engines, as well as other components.

This decision means that existing orders will be fulfilled, but new orders will play an increasingly marginal role.

In addition, Continental is analysing its business with components for exhaust-gas after-treatment and fuel supply systems due primarily to intensive price pressure as well as the high degree of dependency on the further market development.