Conti eyes slow, steady growth in 2023

HANOVER, Germany—After chalking up "respectable" earnings and a double-digit gain in sales during a "challenging" fiscal 2022, Continental A.G. is forecasting continued growth in 2023, albeit at a lower pace.

Conti reported adjusted pre-tax operating income of $2.1 billion (up 5.2 percent) on 16.7 percent higher sales of $41.4 billion, yielding a slightly lower operating ratio of 5.1 percent. For fiscal 2023, Conti is projecting sales growth of 6.6 percent to 14.2 percent and a slight improvement in earnings.

Conti is basing its fiscal 2023 forecast in part on expectations of 2 percent to 4 percent growth in global production of passenger cars and light commercial vehicles—compared with 7 percent growth in 2022—while earnings will be impacted by "significantly" higher costs for materials, wages/salaries and energy and logistics.

"2022 was particularly challenging for us in several respects," Continental CEO Nikolai Setzer said. "The war against Ukraine drove up the prices for raw materials, semi-finished products, energy and logistics. It is also the reason why we continue to strive for a controlled withdrawal from the Russian market."

The company also cited restrictions due to the coronavirus pandemic in China, the ongoing semiconductor shortage and additional costs resulting from price increases for raw materials, semi-finished products, energy and logistics for its earnings performance.

Expectations for the tire business unit are similar. Conti is projecting sales growth in 2023 for the tire business of 3.6 percent to 10.7 percent after registering 18.6 percent growth in fiscal 2022 to $14.7 billion. The EBITDA operating income was up 4.7 percent to $2.8 billion, for an 18.9 percent operating ratio.

Conti is basing its forecast in part on its expectations of 1 percent to 3 percent in global unit sales of passenger/light commercial vehicle tires and lower medium/heavy truck tires.

Among highlights for the tire business in 2022:

• increased sales of higher value-added larger rim-diameter tires;
• rising sales of tires for electric vehicles;
• continued progress on engineering tires with renewable and recycled materials, such as the Conti Urban medium truck tire designed for electric buses and delivery vehicles of the future.

Conti said it continues to work toward a "controlled withdrawal" from the Russian market, a process that includes divesting its tire plant in Kaluga. The sale process is at an "advanced stage," Conti said, although regulatory approvals required to ensure its successful conclusion have not been made yet.

Conti did not at this time provide regional breakdowns of its global sales.