Latest news with #NikolaiSetzer
Mint
6 days ago
- Automotive
- Mint
Continental Cuts Margin Target Over US Tariffs Ahead of Breakup
Continental AG lowered a profitability target for the year due to rising costs from US President Donald Trump's tariffs as the German automotive supplier forges ahead with a plan to dismantle itself. Continental now sees an adjusted Ebit margin of as much as 11% for fiscal 2025, from as high as 11.5% previously, it said Tuesday ahead of an investor meeting in Frankfurt. The change reflects currency fluctuations as well as lower revenue expectations at its ContiTech industrial unit and the impact of US levies on the tires business. 'We have imports from Europe hit by tariffs since the beginning of May, and also need to consider steel and aluminum duties,' Chief Executive Officer Nikolai Setzer said during a call with reporters. 'That leads to higher production costs in the US.' Continental is tempering its earnings ambitions as it prepares to list its car parts division Aumovio in September and sell its industrial unit ContiTech next year to focus solely on tires. The plan reverses decades of acquisitions and is one of several strategic shakeups reordering Europe's automotive industry, which is contending with tariffs, intensifying competition from China and high labor and energy costs in Europe. Its peers ZF Friedrichshafen AG and Robert Bosch GmbH are cutting jobs and closing factories, while automakers including Porsche AG and its parent Volkswagen AG are reducing production capacity to deal with muted demand in their home region. Continental said Tuesday it may use proceeds from the ContiTech sale for special dividends and share buybacks, and announced new sales and profit ambitions for the combined tires and ContiTech operations. In the next three to five years, Continental sees potential for consolidated sales of as much as €22 billion and a consolidated adjusted earnings before interest and tax margin of as high as 14.5%. The most recent mid-term targets, announced in 2023, forecast that sales at the tires unit could reach €18 billion, and €9 billion at ContiTech. Those figures still included the contribution from OESL, a business that generated €1.9 billion in revenue last year and will be sold in the second half. 'The markets are weaker than what we expected back then,' Setzer said, citing slowing demand for cars and tires in Europe. 'In America we need to see how the tariffs play out.' As a smaller and more nimble manufacturer, Continental intends to grow its business selling high-performance tires while expanding in Asia and North America and leaving less promising sectors. It has already announced it's exiting agricultural tires and ending truck tire production in India. ContiTech employs almost 40,000 people globally and makes an array of rubber and plastics products. The listing of Aumovio, announced last August, followed years of struggles with high investment needs, waning demand and stiff competition. The tires business — Continental's most profitable division — generates most of its sales supplying passenger cars. This article was generated from an automated news agency feed without modifications to text.
Reuters
6 days ago
- Automotive
- Reuters
Continental revises down profitability targets on trade turbulence
BERLIN, June 24 (Reuters) - German car parts supplier Continental ( opens new tab revised down profitability targets for its core tyre business and with it the broader group on Tuesday, pointing to currency effects and increasing trade barriers. The company now sees its 2025 adjusted EBIT margin for tyres in a range of 12.5 to 14%, compared with a previously forecast 13.3-14.3% range, it told investors at the group's capital markets day. The adjusted EBIT margin for the group this year is now expected to fall in a range of 10 to 11%, compared with a previously forecast 10.5-11.5% range. The new outlook takes into account current U.S. import tariffs, the company said. Continental also confirmed plans to sell its ContiTech division next year, as it works to pare back the company into a pure-play tyre maker. "Unfortunately, the reasons for our internal transformation are also increasing every day," CEO Nikolai Setzer told reporters, pointing to macroeconomic challenges for the industry and geopolitical turbulence, with tariffs weighing on its supply chain. The company is also planning a spinoff of its automotive business, under the new name Aumovio, with a planned listing in September. "We already have a date. Our preparations are taking very firm shape," CFO Olaf Schick said, adding that Aumovio would announce details in due course.
Mint
21-06-2025
- Automotive
- Mint
Continental's Split Shows How Germany's Business Model Is Shifting
(Bloomberg) -- Continental AG intends to become the latest German manufacturing stalwart to dismantle itself, highlighting the pressure to become more agile to weather structural issues at home and respond to mounting competition abroad. Tracing its roots to producing rubber hoof buffers for horses in the late 19th century, the Hanover-based company plans to split into three: the core tire business, rubber components and auto parts. The moves, which Continental will pitch to investors on Tuesday, would unwind decades of diversification and reflect Germany's shifting business model. 'Continental is a very good example of how German companies are finding it difficult to navigate the transformation,' said Stefan Bratzel, head of the Center of Automotive Management in Bergisch Gladbach, Germany. 'This breakup shows one way that the model of a big, one-stop shop doesn't work anymore.' Once favoring sprawling structures, German businesses are getting smaller and more nimble in response to rapidly changing technology and geopolitical volatility. Industrial giant Siemens AG and steelmaker Thyssenkrupp AG already moved to split up years ago. Automakers have shifted as well as the industry reacts to Chinese rivals and the transition to electric vehicles. After Daimler split its cars and truck businesses and Volkswagen AG partially spun off the Porsche sports-car brand as well as its commercial vehicle unit, Continental's strategic shift shows how the supply chain is now starting to adapt. Chief Executive Officer Nikolai Setzer wasn't always so enthusiastic about a breakup. Two years ago, he told investors that the global automotive and industrial group would stick to its three-pillar structure, because it provided better insulation from unforeseen downturns. That changed last August, when Continental announced plans to spin off its auto-parts unit and lowered earnings forecasts due to weak car demand in Europe. At that point, its non-tire rubber unit ContiTech was becoming more of an industrial player and drifting away from the automotive business, according to the 54-year-old executive. A second carveout would leave Continental with a tires-only portfolio, which nets the biggest profits. 'The common markets of our three sectors were reducing or diminishing over time — the sectors had different purposes, customers and products, so synergies were limited,' Setzer said in an interview. 'As soon as you have different entities within a company, you have to see whether the synergies outweigh the challenges of holding them together.' Headwinds have increased in Germany after two years of contraction and minimal growth projected this year. For Europe's largest economy, the changed corporate strategy is not without risk. Smaller companies could be more easily swallowed by rivals or relocate to escape smothering bureaucracy and high labor costs. That puts pressure on Chancellor Friedrich Merz's administration to move fast on reforms that can revive prospects for domestic companies, even though hundreds of billions of euros in planned debt-financed government spending has brightened the mood. While the carveout of parts business Aumovio is a done deal, union leaders are concerned that separating rubber unit ContiTech from the tire business would add costs and put jobs at risk. They're threatening to use their control of half the seats on the supervisory board to try to block the move. What Bloomberg Intelligence Says: The restructuring will make Continental a pure-play tire business, which could position it for a rerating. — Gillian Davis, industry analyst (Click here for the full report) 'There are considerable synergies between tires and ContiTech,' Matthias Tote, the unit's works council chief and a supervisory board member, said in an internal memo sent to workers on Monday. Jörg Schönfelder, another employee representative on the board, said executives are moving ahead 'without adequately assessing the potential risks.' The company has already announced plans to close five ContiTech sites completely and two partially, which will cut hundreds of jobs. Despite the resistance, Chairman Wolfgang Reitzle can break the deadlock, though the tensions could spark legal challenges and delay the process. The motivation for management is clear. With the stock effectively flat-lining over the past five years, Continental is worth about a third less than rival Michelin, which has recently moved in the opposite direction and expanded its non-tire business. Continental's breakup will happen in two stages with the listing of Aumovio planned for September. The sale of ContiTech — which employs almost 40,000 people globally and makes an array of rubber and plastics products — is targeted for next year. 'The auto spinoff is the right thing to do, just probably five years too late,' said Harry Martin, an analyst at Bernstein. 'It's not unleashing a lot of growth potential.' To be sure, some German conglomerates remain intact. Robert Bosch GmbH, a major automotive supplier and industrial tech firm, is shielded from breakup pressure by its foundation ownership. Merck KGaA, which is active in pharmaceuticals and specialty chemicals, and consumer goods maker Henkel remain largely untouched. Conglomerates once promised stability and efficient capital allocation across sectors, but sprawling portfolios have fallen out of favor as investors push for focus and higher returns. Continental's breakup reflects a broader retreat from the model, as complexity and weak synergies increasingly outweigh the benefits of diversification. For Setzer, Germany's economic woes are only part of the driving force to split up. The company has seen 'tempered growth' in its global markets, specifically in Europe and North America, he said. In China, the automotive unit's sales have been falling short of the market and that's likely to continue, according to Aumovio's top executive. 'In such an environment where you need to adapt fast because visibility is so low, where customers can't always give you reliable forecasts, that's where you need small, agile teams,' Setzer said. 'The better you can adapt now, the better you will profit in the future.' --With assistance from William Wilkes and Isolde MacDonogh. More stories like this are available on
Yahoo
06-05-2025
- Automotive
- Yahoo
German car parts supplier Continental back in black in first quarter
Nikolai Setzer, Chairman of the Executive Board of Continental AG, speaks at the company's Annual Shareholders' Meeting at the Hannover Congress Centrum (HCC). Moritz Frankenberg/dpa German automotive parts maker Continental AG reported on Tuesday that it has returned to profit in the first quarter following a loss in the same quarter of the previous year, and this was in spite of a slight drop in sales. Continental updated its fiscal 2025 outlook to reflect the planned automotive group spin-off, which has been reported separately as a discontinued operation. In the first quarter, net income attributable to shareholders of the parent was €68 million ($77 million), compared to a loss of €53 million a year ago. Earnings per share were €0.34, compared to a loss of €0.27 last year. Adjusted earnings before interest and taxes (EBIT) were €639 million, with a margin of 6.6%. The company noted that the planned automotive spin-off has led to the mandatory application of international financial reporting standards (IFRS) number 5. Without the application of IFRS 5, adjusted EBIT would have been €586 million, with a 6% margin. In the prior year, adjusted EBIT was €201 million, with a margin of 2.1%. The company noted that the automotive group sector achieved significantly higher earnings year-on-year, despite declining automotive production in Europe and North America. Tyres also recorded a strong improvement in earnings in the first quarter. Consolidated sales were €9.707 billion, down 0.8% from €9.788 billion a year ago. In the first quarter of 2025, the global production of passenger cars and light commercial vehicles was slightly higher year-on-year, improving by around 1% to 21.7 million units. Continental chief executive Nikolai Setzer said, "We made a solid start to the year, significantly improving our earnings for the Continental group in the first quarter compared with 2024, and are confident that we will achieve our annual targets." Looking ahead, for fiscal 2025, for the continuing operations of tyres and ContiTech, Continental expects consolidated sales in the range of around €19.5 billion to €21 billion and an adjusted EBIT margin of around 10.5% to 11.5%. For the discontinued operations of the automotive group sector, Continental expects sales of around €18 billion to €20 billion and an adjusted EBIT margin of around 2.5% to 4%, operationally unchanged and excluding the effects of IFRS 5. The forecasts for sales and adjusted EBIT margin for the individual automotive, tyres and ContiTech group sectors remain unchanged. The company added that the outlook for the year does not take into account any potential impact resulting from possible future trade restrictions.
Yahoo
06-05-2025
- Automotive
- Yahoo
Continental reports strong Q1 profit on cost cuts but tariff uncertainty looms
By Rachel More BERLIN (Reuters) -German car parts maker Continental reported stronger-than-expected earnings growth on Tuesday in part from cost-cutting efforts, although it warned increasing U.S. trade restrictions from higher tariffs pose economic risks. "We made a solid start to the year," CEO Nikolai Setzer said in a statement on its first-quarter results. However, the statement also highlighted the threat of increasing trade hurdles, which were not factored into the group's full-year guidance. Continental is in the process of splitting off two of its three businesses, seeking a leaner form as a pure-play tyre maker that it hopes will be better positioned in a volatile market rattled by tariffs imposed by the U.S. The company adapted its 2025 outlook to omit the auto division ahead of a spin-off of the business expected this year, forecasting lower sales but increased profitability. "Geopolitical tensions and the potential impact of trade restrictions are causing a high degree of uncertainty about global economic development in the current fiscal year," the company said. RESTRUCTURING SAVINGS The group comprising the tyres and ContiTech businesses expects sales in a range of around 19.5 billion to 21.0 billion euros ($22 billion to $23.8 billion) and an adjusted profit margin of around 10.5% to 11.5%. Germany's other major auto parts suppliers, Bosch and ZF, are also undergoing radical restructuring as the sector grapples with a drop in car production and high costs, now compounded by the trade conflict affecting exports to the United States. Last month, Continental revealed plans to turn its ContiTech rubber and plastics division into an independent entity, targeting a likely sale, while its automotive unit is expected to be spun off this year and subsequently listed on the Frankfurt stock exchange. The company reported adjusted earnings before interest and taxes (EBIT) of 586 million euros in the first quarter, compared to 201 million euros a year earlier and beating a forecast of 485 million euros, according to a company-provided poll of analysts. Continental's adjusted EBIT margin in the first three months of 2025 was 6.0% versus a forecast 5.1%. "The quarterly results reflect our focus on improving our financial position – and show that our efficiency measures are paying off," said Continental CFO Olaf Schick. ($1 = 0.8836 euros) Sign in to access your portfolio
