Auto suppliers: Large orders bring a ray of hope in mixed Conti balance sheet

The high pressure from the energy crisis, delivery stress and rising interest rates continue to affect the automotive supplier and tire manufacturer Continental.

Auto suppliers: Large orders bring a ray of hope in mixed Conti balance sheet

The high pressure from the energy crisis, delivery stress and rising interest rates continue to affect the automotive supplier and tire manufacturer Continental. In ongoing business, however, the Dax group was able to close the third quarter relatively solidly, and new large orders should also bring fresh money into the till. The Hanoverians are also dependent on consumers and corporate customers going along with them - Conti indicated that end products such as vehicle technology and tires are likely to become more expensive.

The bottom line was a loss of 211 million euros, as the company announced on Thursday. From July to September 2021, the car and machine supplier still made a profit of 309 million euros, although the chip bottleneck and corona demand shock had already had an impact back then. The problems in the supply chains, especially with electronics, are not over. Added to this are the escalating procurement costs for various important raw materials and intermediate products as well as for the purchase of energy.

The high inflation does not stop at Conti's end products either. CEO Nikolai Setzer said that as part of the measures "particularly price agreements were made with our customers due to the massive increase in costs". The management did not initially explain where exactly and by how much you had to open it.

Chief Financial Officer: Net loss cannot be ruled out

According to CFO Katja Dürrfeld, some prices for raw materials in the tire division are currently recovering slightly. "But they're not quite breaking through because of longer-term contracts," she told the news agencies dpa and dpa-AFX. Incidentally, the following applies: "We have made a big step forward in customer talks and were also able to make good deals in the third quarter." Nevertheless, it cannot be ruled out that a net loss will again be incurred at the end of the year.

For 2022, Conti expects additional spending of 3.4 billion euros, slightly less than the 3.5 billion euros initially calculated. The Italian competitor Pirelli, for example, already passed on sharp price increases for tires to customers in the third quarter.

The interest rate level, which is increasing again after a long time, also plays a role. In the core car business, it led to an impairment of almost half a billion euros. Over the first three quarters, Conti's debts increased by half to almost 6 billion euros.

Setzer spoke of a "challenging environment" that will probably continue for a while. At the same time, it shows that the changes are taking effect. This also includes job cuts, which trade unionists sharply criticize. The adjusted operating result grew from 412 million euros to 605 million euros, with which the management was satisfied.

The group with almost 200,000 employees now wants to distribute its purchase of basic materials to more suppliers. The business forecast for the year that is coming to an end remains untouched. Setzer restricted: "Nevertheless, the financial result does not correspond to the medium-term goals we have set ourselves."

Continental was able to increase its quarterly sales from 8 to 10.4 billion euros, which is also considered a comparatively respectable value in view of the difficult situation in the industry. There is tailwind from global car production, new orders are stabilizing the books.

Conti is planning more than two billion euros for a new braking system that is to go into series production at an automaker in North America in 2025. Several orders for interior displays have recently been received, and the associated inventory value has now reached seven billion euros.

On the other hand, quality problems with hoses, which can occur in air conditioning systems, are unpleasant. Continental also has to deal with the consequences of a hacker attack on its IT systems. In addition, further investigations into the alleged involvement in the VW diesel scandal are underway - the public prosecutor's office is also investigating the possible involvement of Conti employees.

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