Virus crisis squeezes conti profits by half

virus crisis squeezes conti profits by half

The corona crisis hit the business of automotive supplier continental hard in the first quarter.

As reported by the hanover-based DAX-listed corporation, profits fell by almost half to 292.3 million euros. Conti even expects red figures for the second quarter.

The entire auto industry is struggling with collapsed sales and overcapacities due to the pandemic, and suppliers and tire manufacturers are also feeling the impact.

Production has not yet resumed at one in five of continental’s 249 plants. Worldwide, around 60 percent of the nearly 240.000 employees reduce their working hours.

In germany, meanwhile, almost all factories have restarted, with only the roding site in bavaria expected to remain idle until mid-may. Sales in the period from january to march fell by 10.9 percent compared with the same period of the previous year to 9.8 billion euros.

"The financial impact of the corona pandemic will be even more noticeable in the second quarter," warned CEO elmar degenhart. Chief financial officer wolfgang schafer emphasized that north america and europe account for around three quarters of conti’s sales – and it is precisely there that the bands are now still mainly at a standstill. "To that extent, i would assume that we will not be in the black in the second quarter," said schafer.

The current quarter was likely to be the weakest in 2020. Even if operating profit is adjusted for depreciation and amortization or special effects, it already fell sharply at continental in the first quarter: at minus 51.1 percent to 431.9 million euros, the decline was even more severe than that in consolidated net profit.

Things are looking up again in china. However, the early production stop in the country of origin of the new exciter left deep scars throughout the industry. In the people’s republic – the world’s most important automotive market – only half as many passenger cars and light commercial vehicles were produced as a year ago, 20 percent less in europe and 10 percent less in north america.

It is not yet possible to give a precise outlook for developments over the remainder of the year "due to the continuing strong momentum," it said. "At the moment, it’s almost a problem for us to predict the next 14 days in sales," said schafer. However, revenue and profit were expected to be clearly below the 2019 figures.

Continental was already in crisis before the corona outbreak due to the stuttering automotive market and had announced a rough restructuring program. Up to 20.000 jobs are to be affected by 2029, 500 million euros in gross costs are to be saved. Further measures" were examined, it was said. In the wake of the pandemic, the company is now also showing restraint in its investments. For the current fiscal year, at least 20 percent less is to be spent than in 2019.

As of 31. As of march 2020, continental had liquid funds of 2.5 billion euros and additional committed, unused credit lines of over 4.3 billion euros. "We are on a solid footing, independent and fully capable of acting, despite the challenging situation worldwide," degenhart assured.

Conti has increased protection in the factories – for example through more frequent cleaning, modified layer tarpaulins or plexiglass partitions. The company manufactures the approximately one million protective masks for its employees each week itself. The executive board decided to extend its initial one-month waiver of ten percent of the fixed salary by a further three months until the end of july.

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