Continental cancels 2020 outlook as coronavirus shuts 40 percent of production locations
Continental is withdrawing its outlook for the current fiscal year due to the uncertainty regarding the duration of restrictions caused by the coronavirus pandemic and the related possible consequences for production, the supply chain and demand.
As announced by the company today in a mandatory disclosure, the timing for a new outlook for 2020 currently cannot be determined since the situation remains very dynamic. Previously, Continental had anticipated consolidated sales for the current year of around €42.5 to €44.5 billion and an adjusted EBIT margin of around 5.5 to 6.5 percent.
At the same time, the technology company published its preliminary business figures for the first quarter. Based on these figures, Continental expects to achieve in the first three months of the year consolidated sales of around €9.4 to €9.8 billion and an adjusted EBIT margin of around 2 to 3 percent. In the Automotive Technologies group sector together with the former Powertrain division, sales of around €5.7 to €5.9 billion and an adjusted EBIT margin of around 0 percent are expected. In the Rubber Technologies group sector, sales of around €3.7 to €3.9 billion and an adjusted EBIT margin of around 7 to 8 percent are expected.
“In periods of crisis, financial liquidity is of top priority. To this end, we are cutting our costs, optimizing our working capital and postponing projects and investments that are not urgently required until further notice. We are, however, continuing to push ahead at full steam with key development projects as well as preparations for upcoming production start-ups. In this way, we are maintaining our ability to function effectively and confidently,” said CEO Elmar Degenhart. At present, more than 40 percent of Continental’s 249 production locations worldwide have temporarily ceased activities for a few days to several weeks in order to protect employees and in response to the drop in demand.
The consequences are reflected in reduced working hours. In Germany alone, about 30,000 employees and thus half of the current workforce have been registered for short-time work as at April 1, 2020. This affects all corporate functions – from production and research and development through to administration, including employees at Continental’s headquarters in Hanover. Certain business units already started reducing working hours in mid-March 2020.
Degenhart summarized: “Our most urgent goal is to further reduce the cash outflow substantially in light of the challenging market development. The numerous steps we have taken are in line with the respective market requirements and the regulations issued by local authorities. We are also coordinating with employee representatives.”
Pointing out the company’s ample liquidity reserves (as at February 29, 2020: cash and cash equivalents of around €2.3 billion and unused committed credit lines of around €4.6 billion), Degenhart added: “We are strong and remain confident. After all, we have a crisis-tested team and a sound balance sheet. And that is why we will master this crisis successfully.”