Continental developing long-term plan to navigate automotive downturn

HANOVER, Germany—Continental A.G.'s Rubber Group recorded a 2.1 percent decline in pre-tax operating earnings (EBITDA) to $1.72 billion for the first half of 2019, despite a 3.1 percent increase in sales revenue.

Segment sales rose to $9.89 billion, partially helped by currency impact and price/mix, Conti reported. The operating ratio fell slightly, to 17.4 percent.

In the tire division, revenue grew 4.9 percent during the six months to $6.41 billion, while pre-tax operating income rose 1.4 percent to $1.35 billion, yielding an operating ratio of 21.1 percent.

As a corporation, Conti suffered a 21.1 percent drop in adjusted pre-tax operating income (EBIT) of $2.02 billion on 0.3 percent lower sales of $25.1 billion.

"At present, our business is being influenced by the slowdown in global automotive production," Chief Financial Officer Wolfgang Schaefer said, noting the company does not expect the headwind to ease in the second half."

The company does not currently envisage a market upturn in the short to medium term," he added.

The firm, earlier, adjusted its outlook downward for fiscal 2019 in the wake of "continued decline" in the global production of passenger cars and light vehicles.

The company now anticipates that the production of passenger cars and light commercial vehicles will be down 2 percent in the U.S., 3 percent in Europe and 10 percent in China. Overall, the company is assuming that global vehicle production will fall by about 5 percent in 2019.

Noting that the automotive industry is undergoing a fundamental, dramatically accelerating and partly disruptive transformation worldwide, Conti's supervisory board and management have outlined a strategy for Continental to maintain its financial strength in the long term, increase its competitiveness and safeguard its viability.

The resulting need for action is being discussed with employee representatives, with the aim of drawing up a plan together in the coming weeks on how to proceed. The executive board and employee representatives will report on the results once an understanding has been reached, Conti said.