Continental Cuts 2019 Outlook on Global Car Production Slump
July 23 2019 - 2:17AM
Dow Jones News
By Max Bernhard
German automotive supplier Continental AG (CON.XE) cut its
earnings and sales guidance for the year, citing a decline in
global car production, as well as lower demand and possible
warranty claims.
Continental had previously forecast global auto production to
remain stable, but it now anticipates a decline of about 5%, the
company said late Monday.
It said it now expects an adjusted operating profit margin of
about between 7% and 7.5% in 2019, compared with previous
expectations of between 8% and 9%. Continental now forecasts sales
of about between 44 billion and 45 billion euros ($49.34 billion
and $50.47 billion) compared with EUR45 million to EUR47 million
before.
Continental's guidance cut is the latest in a slew of profit
warnings from car makers and parts suppliers. Premium car maker
Daimler AG (DAI.XE) cut its earnings outlook twice since last
month, while Chinese manufacturer Geely warned on profit at the
beginning of July. Auto makers have been struggling with slowing
demand in the world's largest markets, such as China and Europe. At
the same time, they have to stem large investments for the
development of new technology and adapt to stricter emissions
rules.
Continental Chief Financial Officer Wolfgang Schaefer said the
company is less optimistic about the second half of the year than
before. "The reason for this is the continuing downward trend in
vehicle production in Europe, in North America and particularly in
China. Unresolved trade conflicts are also contributing to economic
uncertainty," he said.
Continental said the profit warning was also due to
"unanticipated changes in customer demand" which could hit sales of
some of the products in its core automotive division. Earnings may
also take a hit from potential provisions for warranty claims over
the second half of the year. "The causes of these potential
expenses from warranty claims and the corresponding amounts are not
clarified at this time," it said.
Nevertheless, Continental said its results in the second quarter
were solid. Sales in the quarter fell slightly to EUR11.2 billion
from EUR11.4 billion a year earlier, according to preliminary data,
it said. The adjusted operating profit margin shrunk to 7.8% from
10.2%, however. The company is scheduled to report second-quarter
results on August 7.
Write to Max Bernhard at max.bernhard@dowjones.com;
@mxbernhard
(END) Dow Jones Newswires
July 23, 2019 02:02 ET (06:02 GMT)
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