“We posted good results for the third quarter. In the Automotive group sector, we improved our earnings as announced. Faced with weak automotive production, we achieved this by reducing costs and adjusting prices. Tires is performing well in terms of profitability, with the winter tire business getting off to a good start. But ContiTech continues to contend with a weak industrial environment in Europe and North America. With this down phase lasting longer than expected, we are examining additional measures to deal with the economic situation,” said Continental CFO Olaf Schick, adding: “We have also reached an agreement with Vitesco Technologies on the allocation of investigation costs. The associated payment of €125 million by Vitesco Technologies had a positive impact on our net income and free cash flow in the third quarter, which we expect to continue to increase in the fourth quarter due to the seasonal nature of our business. The process of making our business with ContiTech products for the automotive industry independent is also progressing as planned. As announced, we will present this business area to potential buyers and partners in the fourth quarter of this year.”
Outlook for fiscal 2024
For 2024 as a whole, Continental expects the production of passenger cars and light commercial vehicles to decrease year-on-year. We expect demand in the tire-replacement business to pick up slightly in the second half of 2024 compared with the first six months, while the industrial business worldwide is expected to remain sluggish.
Based on the assumptions mentioned as well as current exchange rates, Continental has adjusted its outlook for fiscal 2024 as follows:
For the Continental Group, sales in the range of around €39.5 billion to €42.0 billion (previously: €40.0 billion to €42.5 billion) are expected, while the adjusted EBIT margin is expected to be around 6.0 to 7.0 percent.
For the ContiTech group sector, Continental expects sales of around €6.2 billion to €6.6 billion (previously: €6.6 billion to €7.0 billion) and an adjusted EBIT margin of around 5.8 to 6.3 percent (previously: 6.5 to 7.0 percent).
The tax rate is projected to be around 30 percent (previously: 27 percent). The higher calculated tax rate compared with the previous assumption is mainly due to the allocation of net income to the different countries in relation to comprehensive income. Tax charges that are not directly dependent on income also continue to have an effect. These include foreign (minimum) taxes with deviating bases of assessment as well as foreign withholding taxes that are not deductible in Germany.
Added to this are tax risks in connection with ongoing criminal tax investigations by Italian authorities (see page 105 of the 2023 annual report). As a precautionary measure, Continental has set aside provisions for likely financial charges in this regard. The investigations relate to a possible failure by the Continental companies concerned to comply with the declaration requirements of the Italian financial authorities. According to the authorities, Continental should have paid taxes in Italy for the operations in question, which it instead paid in other European countries between 2016 and 2023.
Decline in automotive production in the third quarter
The global production of passenger cars and light commercial vehicles in the third quarter of 2024 was down sharply on the previous year, falling by around 5 percent to 21.6 million units (Q3 2023: 22.6 million units).
At around 3.6 million units, vehicle production in Europe from July to September 2024 was significantly lower than the prior-year period (-6 percent). Production in North America also fell, amounting in the third quarter to around 3.8 million vehicles (-5 percent). China likewise posted a decline, producing around 7.3 million vehicles in the third quarter of 2024 (-3 percent).
