German technology company Continental is undeterred by the challenging global macro-economic situation and is hopeful that 2023 will see further improvement for the Group.
For 2022, the company reported revenue of 39.4 billion euro (Rs 346,247 crore), up 16.7 percent YoY, adjusted EBIT of 2 billion euro (Rs 17,576 crore), EBIT Margin of 5 percent and net profit of 67 million euro (Rs 588 crore).
The severe impact on profit was due to the fact that in the past fiscal year net income was influenced by negative special effects amounting to around 1 billion euro (Rs 8,788 crore; higher interest rates and other valuation-related effects, in particular, resulted in impairment losses of more than 850 million euro (Rs 7,470 crore) in the Automotive group sector. In connection with its business activity in Russia, Continental also impaired assets of around 87 million euro (Rs 765 crore) as a result of the sanctions imposed.
The company says its performance was particularly impacted by the effects of the war in Ukraine, the restrictions due to the coronavirus pandemic in China, the ongoing semiconductor shortage and additional costs of around 3.3 billion euro (Rs 29,000 crore) resulting from price increases for raw materials, semi-finished products, energy and logistics.
Nikolai Setzer, CEO, Continental said, “2022 was particularly challenging for us in several respects. The war against Ukraine drove up the prices for raw materials, semi-finished products, energy and logistics. It is also the reason why we continue to strive for a controlled withdrawal from the Russian market.”
“Despite facing challenges, we performed well operationally. We met our sales and earnings forecast for the Continental Group and achieved a respectable result. This was thanks to the hard work and commitment of around 200,000 Continental employees worldwide, to whom I would like to express my sincere gratitude,” he added.
Financial discipline and outlook for 2023
To meet the many challenges and strengthen its resilience, Continental says it has implemented more focused cost management and more integrated supervision of its procurement and logistics chain for electronics. It also broadened its supplier base.
“We have proven to be resilient in times of crisis, and we are well positioned to ensure Continental’s long-term development with a focus on value creation,” said Setzer. Continental also initiated price adjustments in all group sectors to compensate for the effects of inflation.
The German technology company says it expects global production of passenger cars and light commercial vehicles to increase by between 2 and 4 percent in 2023. In 2022, this increased by around 7 percent to approximately 82 million vehicles.
On the other hand, it expects significantly higher costs for materials, wages and salaries as well as energy and logistics – amounting to around 1.7 billion euro (Rs 14,939 crore) – are again expected to weigh heavily on the earnings position in fiscal 2023.
Based on these assumptions and given the exchange rates at the beginning of the fiscal year, Continental anticipates consolidated sales for 2023 of around 42 billion euro (Rs 369,096 crore) to 45 billion euro (Rs 395,460 crore) and an adjusted EBIT margin of around 5.5 to 6.5 percent.
The automotive group sector is expected to contribute around 20.5 billion euro (Rs 180,154 crore) to 21.5 billion euro (Rs 188,942 crore) and an adjusted EBIT margin of around 2 to 3 percent.
The tyre business it expects sales of upto 15.5 billion euro (Rs 136,214 crore) with an adjusted EBIT margin of around 12 to 13 percent; ContiTech group sector upto 7.2 billion euro (Rs 63,273 crore) and an adjusted EBIT margin of around 6 to 7 percent.
It aims to have a CAPEX of 6 percent of the total sales.