Continental shares jump on 36% surge in adjusted profit despite sales decline

Investing.com -- Shares of Continental AG (ETR:CONG ) (OTC:CTTAY ) jumped following the company’s Q3 results, which reported a 36% surge in adjusted operating profit (EBIT) to €873 million. 

At 3:31 am (0831 GMT), Continental AG was trading 6.9% higher at €60.41.

This growth pushed the adjusted EBIT margin to 8.9%, up from 6.3% in Q3 2023, defying challenges faced across its main business sectors, particularly in the automotive market. 

The company noted that this profitability increase was done through rigorous cost management and efficiency improvements, bolstered by favorable pricing adjustments in its Automotive division.

However, consolidated sales for the quarter fell by 4% to €9.8 billion, down from €10.2 billion in the previous year.  The Automotive sector, despite a 4.7% sales decline to €4.8 billion, reported improved profitability. 

"Faced with weak automotive production, we achieved this by reducing costs and adjusting prices. Tires is performing well in terms of profitability, with the winter tire business getting off to a good start. But ContiTech continues to contend with a weak industrial environment in Europe and North America," said Continental's CFO, Olaf Schick.

The adjusted EBIT margin rose to 4.2% from 2.8% a year ago, due to efficiency measures and favorable price negotiations with automotive manufacturers. 

"Automotive is on track to fulfill the requirements for a spin-off by the end of 2025. This spin-off is still being evaluated," said Continental's chief executive, Nikolai Setzer.

Looking forward, Continental expects further gains in Automotive, fueled by anticipated higher production volumes and customer product launches in Q4.

The company’s Tires division also posted solid results, achieving a slight sales increase of 1.9% to €3.5 billion and an adjusted EBIT margin of 14.5%. 

Boosted by strong winter tire sales in Europe, the Tires sector is set for additional growth as Continental expands its Rayong plant in Thailand to meet rising demand in the Asia-Pacific region.

However, ContiTech, Continental’s industrial solutions division, continued to face challenges due to weak demand in Europe and North America. 

This sector saw a 9.9% sales drop, with revenue down to €1.5 billion, and a lower adjusted EBIT margin of 4.5%. 

In response to this, Continental adjusted its full-year outlook, lowering expected Group sales to €39.5-42.0 billion, down from the previously estimated €40.0-42.5 billion.

Source: Investing.com