Continental promises stronger second half as cost-cutting measures sink in
Q2 profits up 40%, beating expectations
Sales outlook lowered amid dampened demand
Cost-cutting measures starting to take effect: CFO
Shares up 5%
Adds detail from investor call in paragraphs 1-4
By Victoria Waldersee and Andrey Sychev
BERLIN, Aug 7 (Reuters) -Continental CONG.DE delivered better-than-expected results on Wednesday and said the second half of the year would be even stronger as cost-cutting and restructuring measures underway at the German car parts supplier began to pay off.
The company lowered its sales outlook to 40 billion to 42 billion euros ($45.87 billion) and said it expected to land at the lower end of that corridor but anticipated stronger margins in the quarters ahead because of planned costs cuts of around 100 million euros.
Still, executives warned investors of slower demand weighing on sales prospects, with Chief Financial Officer Olaf Schick describing the weak market in Europe as "a bit dramatic" and saying China was growing slower than previously thought.
The company was looking to boost the proportion of its sales in China to local Chinese customers, executives said, in line with a wider industry trend of fencing off business in the country to shield against possible trade barriers.
"PROMISING EARLY SIGNS"
The company's profit margins improved across all divisions, with adjusted earnings before interest and taxes up 40.6% from last year to 704 million euros ($768.35 million).
Still, Continental lowered its sales outlook and cut its margin forecast in the automotive sector to 2.5-3.5% from 3-4% previously, citing weak demand in Europe.
Analysts at Citi said the improvement in the second quarter was "positive" and that the adjusted 2024 outlook was "not as bad as feared".
"This could underpin promising early signs on 2025," Citi said, pointing to further cost-cutting measures expected next year.
The shares were up 5.3% from Tuesday's close, topping Germany's blue-chip DAX .GDAXI index.
"RAYS OF HOPE"
The car parts supplier has been fighting to keep costs in check and restructure in the face of a tumbling market capitalisation and weak auto demand. Its share price has halved since June 2021, taking its market value to 11.3 billion euros.
Wednesday's results were a "mix of some rays of hope", analysts at Bernstein Research said, pointing to high order intake in the automotive division.
On Monday, Continental said it was considering a spin-off and subsequent listing of its automotive unit on the Frankfurt stock exchange, with an executive board decision expected in the fourth quarter.
The move would effectively halve Continental's revenue and carve out the automotive part of its tyre and plastics business ContiTech.
For months, the company has hinted at major changes in the division, whose portfolio ranges from brakes to sensors and assistance systems, after struggling for several years with low profitability.
However, CEO Nikolai Setzer had said at a capital markets day in December that the automotive business would stay within the company, and that only the user experience unit was being made independent.
($1 = 0.9166 euros)
Reporting by Andrey Sychev and Victoria Waldersee; Editing by Rachel More, Clarence Fernandez, Sonali Paul and Sharon Singleton
Mga Kaugnay na Asset
Pinakabagong Balita
Disclaimer: Ang mga kabilang sa XM Group ay nagbibigay lang ng serbisyo sa pagpapatupad at pag-access sa aming Online Trading Facility, kung saan pinapahintulutan nito ang pagtingin at/o paggamit sa nilalaman na makikita sa website o sa pamamagitan nito, at walang layuning palitan o palawigin ito, at hindi din ito papalitan o papalawigin. Ang naturang pag-access at paggamit ay palaging alinsunod sa: (i) Mga Tuntunin at Kundisyon; (ii) Mga Babala sa Risk; at (iii) Kabuuang Disclaimer. Kaya naman ang naturang nilalaman ay ituturing na pangkalahatang impormasyon lamang. Mangyaring isaalang-alang na ang mga nilalaman ng aming Online Trading Facility ay hindi paglikom, o alok, para magsagawa ng anumang transaksyon sa mga pinansyal na market. Ang pag-trade sa alinmang pinansyal na market ay nagtataglay ng mataas na lebel ng risk sa iyong kapital.
Lahat ng materyales na nakalathala sa aming Online Trading Facility ay nakalaan para sa layuning edukasyonal/pang-impormasyon lamang at hindi naglalaman – at hindi dapat ituring bilang naglalaman – ng payo at rekomendasyon na pangpinansyal, tungkol sa buwis sa pag-i-invest, o pang-trade, o tala ng aming presyo sa pag-trade, o alok para sa, o paglikom ng, transaksyon sa alinmang pinansyal na instrument o hindi ginustong pinansyal na promosyon.
Sa anumang nilalaman na galing sa ikatlong partido, pati na ang mga nilalaman na inihanda ng XM, ang mga naturang opinyon, balita, pananaliksik, pag-analisa, presyo, ibang impormasyon o link sa ibang mga site na makikita sa website na ito ay ibibigay tulad ng nandoon, bilang pangkalahatang komentaryo sa market at hindi ito nagtataglay ng payo sa pag-i-invest. Kung ang alinmang nilalaman nito ay itinuring bilang pananaliksik sa pag-i-invest, kailangan mong isaalang-alang at tanggapin na hindi ito inilaan at inihanda alinsunod sa mga legal na pangangailangan na idinisenyo para maisulong ang pagsasarili ng pananaliksik sa pag-i-invest, at dahil dito ituturing ito na komunikasyon sa marketing sa ilalim ng mga kaugnay na batas at regulasyon. Mangyaring siguruhin na nabasa at naintindihan mo ang aming Notipikasyon sa Hindi Independyenteng Pananaliksik sa Pag-i-invest at Babala sa Risk na may kinalaman sa impormasyong nakalagay sa itaas, na maa-access dito.
