Automotive technology and tire manufacturers continue to fight their way through the multiple crisis. High depreciation allowed the Conti to narrowly avoid a loss. How will 2023 be?
The bottom line is that the strong cost increases for energy, raw materials and transport have almost completely eaten up the profit of the automotive supplier Continental 2022 – but business should recover in the current year. As the Dax group announced, the net result shrank from 1.4 billion euros (2021) to 67 million euros. High depreciation due to interest rates rising again and the sanctions against Russia also played a role, explained CFO Katja Dürrfeld.
CEO Nikolai Setzer spoke of “another year with headwind”. But: “In view of the numerous challenges, we did well operationally in 2022.” The economic consequences of the war in Ukraine and the Covid lockdown in China had weighed heavily on the Hanoverians. Added to this was the lack of electronics, which slowed down the global auto and mechanical engineering business. However, Conti achieved his previously adjusted goals.
Estimate: situation will stabilize in the current year
The company estimates that the situation will stabilize in the current year. It is assumed that many orders can be processed. According to the forecast, global production of passenger cars and light commercial vehicles will increase. Conti’s revenues – recently increased by almost 16.7 percent to 39.4 billion euros – should level off at 42 to 45 billion euros. The profit margin could also increase after slipping last year. Before interest, taxes and special factors, 5.50 to 6.50 euros should remain for every 100 euros in sales.
Setzer plans a “controlled withdrawal” from Russia: “This includes the sale of our business activities.” At the Kaluga plant, discussions on this are in advanced stages. After the expected official approval, it will then “come to fruition”.
In the group, the problem child of classic car supply should do better in 2023 after the division was slightly in the red last year. The incoming orders are at a good 23 billion euros, including braking technology. The lack of microchips in particular caused a production backlog in the industry.
Continental wants to expand business
Continental wants to expand the business with software for assistance functions in cars and automated driving. With the drive technologies, which have already largely been outsourced to the Vitesco company, one is not dependent on the debate about a ban on combustion engines, emphasized Setzer. The group offers supplies for electric vehicles as well as for modern diesel and petrol cars.
The tire business developed slightly better than expected in 2022. With a return on sales of 12 to 13 percent, Continental expects that it will once again make the lion’s share of the operating profit this year.
“In our core markets of Europe and North America in particular, we expect business figures to increase,” said Dürrfeld on the general outlook. At the same time, the financial pressure is likely to continue – additional costs of 1.7 billion euros are estimated. The board summed it up: “Despite all the challenges, we are cautiously optimistic about further developments this year.”
Continental intends to propose a dividend of EUR 1.50 per share for 2022, which is a reduction of 70 cents. The group has invited to the general meeting for April 27th.
Investigations against employees of Conti
The public prosecutor’s office in Hanover had started investigations against employees of Conti, who are accused of aiding and abetting fraud in connection with the diesel scandal. According to Dürrfeld, the provisions for possible fines and liability risks at the end of 2022 were “a low three-digit million amount”. This has now fallen to a higher two-digit million sum. In addition, the management did not want to comment further on the diesel investigations because of the ongoing process.
At Conti, a conversion and savings program will run until 2029, as part of which many jobs will also be cut. Current steps this year have “no direct relation to personnel measures,” said Setzer. “But of course we always look at efficiency measures: do we have the right focus?”
At the end of 2022, Continental employed around 199,000 people, 4.3 percent more than a year earlier. “Most of the development took place on the automotive side, especially in the technological growth areas,” said the CEO. Net debt recently increased by a good fifth to almost 4.5 billion euros.
Source: Stern
