Continental AG (OTC:) (CON.DE) announced during its earnings call that it plans to separate and spin off its automotive group by the end of 2025, aiming to create two independent listed entities and capitalize on growth opportunities in the tire and ContiTech sectors. Despite a challenging market, the company reported €10 billion in sales for Q2 2024 and a 7% EBIT margin.
Continental also highlighted a positive free cash flow and the implementation of self-help measures to achieve midterm targets, including cost reductions and operational excellence. The automotive group is expected to be listed on the Frankfurt Stock Exchange and qualify for the M-DAX.
Key Takeaways
- Continental AG plans to spin off its automotive group by end of 2025, aiming for two independent listed entities.
- Q2 2024 sales reached €10 billion, with a negative organic growth of 3%.
- The automotive sector outperformed the market with a -2% decline compared to the weighted light vehicle production.
- A 7% EBIT margin was achieved, driven by pricing negotiations and self-help measures.
- Positive free cash flow of €147 million was reported, with various measures being implemented to reach midterm targets.
- The company is confident in reaching a single-digit term on the capital market by 2027.
- Continental has reduced its R&D spending by three percentage points in Q4 and is in discussions with Volkswagen (ETR:) and Carriot about their involvement with Rivian (NASDAQ:).
Company Outlook
- Continental aims for two independent listed entities post-spin-off, with the automotive group to be listed on the Frankfurt Stock Exchange.
- The company is confident about reaching a single-digit term on the capital market by 2027.
- Continental has slightly lowered its top and bottom line guidance corridors for the automotive and tires sectors due to challenging market conditions.
Bearish Highlights
- Negative organic growth of 3% in Q2 2024 due to weak industry markets.
- Delayed vehicle launches and weaker market recovery expected in the second half of the year.
- Market outlook for passenger cars and light trucks revised down to a decline of 3% to 1%, mainly due to a weakening European OE market and slower growth in China.
Bullish Highlights
- The tire sector saw growth in the replacement market, especially in Europe and Asia-Pacific.
- Continental expects better volume development in the European tire market in the second half of the year.
- Continental is making progress in negotiating pricing agreements for 2024 and 2025.
Misses
- The…
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