Release Date: March 04, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Continental AG (CTTAF, Financial) achieved a significant improvement in EBIT, increasing by EUR 170 million, despite challenging market conditions.
- The company successfully implemented cost-saving measures, safeguarding EUR 400 million for 2024, with more than EUR 200 million already secured in the previous year.
- The Tires segment showed solid performance, with a healthy winter tire business and better-than-expected replacement market sales, particularly in the US.
- Continental AG (CTTAF) reduced its net indebtedness from EUR 4 billion to EUR 3.7 billion, reflecting effective debt management.
- The company proposed a slight uptick in dividends to EUR 2.5, supported by positive free cash flow development and a decrease in net debt.
Negative Points
- Continental AG (CTTAF) faced a 6% organic decline in sales in the automotive sector, reflecting persistent market challenges.
- The ContiTech segment was burdened by weak industry markets, particularly in the second half of the year, impacting overall performance.
- The company incurred non-cash effective tax expenses of around EUR 100 million due to spin-off preparations, affecting net income.
- Despite improvements, the Automotive division's adjusted EBIT margin of 2.3% for the full year was marginally below the low end of the target.
- The company anticipates ongoing headwinds from raw material costs in 2025, which could impact profitability in the Tires segment.
Q & A Highlights
Q: Can you provide an idea of the impact of the recent tariff announcement on Continental AG?
A: Nikolai Setzer, CEO, mentioned that the impact is still being quantified. Continental has a high localization in the US with two tire plants and a smaller plant in Mexico. They are optimizing supply chains and discussing with customers to manage the situation. Overall, they are relatively local and not overexposed.
Q: Why is the margin guidance for Tires in 2025 expected to be flat compared to 2024?
A: Nikolai Setzer, CEO, explained that raw material costs and certain cost inputs have increased, which they need to balance with volume, price/mix, and performance. They are hopeful for a better Q1 in 2025 compared to the previous year, and they are working to improve margins.
Q: What is the outlook for Automotive division margins and cash flow in 2025?
A: Olaf Schick, CFO, stated that they expect further margin improvement in 2025, starting better in Q1. They aim to achieve positive territory in Q1 and further improve cash flow in 2025, although specific details were not provided.
Q: Can you provide an update on the ContiTech Automotive business disposal and its impact on guidance?
A: Nikolai Setzer, CEO, confirmed that the sales process for the ContiTech Automotive business has started. The business represents roughly EUR2 billion in sales with a low single-digit return on sales. The guidance currently includes this business, but more details will follow as the process progresses.
Q: How is Continental AG preparing for the automotive spin-off amid current market challenges?
A: Olaf Schick, CFO, stated that they are on track with spin-off preparations, having achieved margin improvement and positive free cash flow in Automotive. They have a detailed separation and capital market readiness plan, with the spin-off expected in the second half of the year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
