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Global Economy

"The headwind is hurricane-like"

The automotive supplier Continental has slipped unusually heavily into the red. The DAX group reported a loss of 250.7 million euros for the past second quarter. Analysts had actually only expected the profit to be cut in half. A year ago, the group had brought in a quarterly profit of 545.3 million euros.

As an industry that is heavily dependent on economic cycles, automotive suppliers are used to difficult phases. Several extraordinary problems are currently coming together, which pose particular challenges for numerous German companies in the industry. "The current headwind is hurricane-like," said Continental CFO Katja Dürrfeld. Management cited the price increases for raw materials, energy and logistics triggered by the Ukraine war as well as the shortage of electronic components and the corona lockdowns in China as the reason for the net loss.

Numerous special effects

There were also numerous special effects that totaled more than half a billion euros. Book value write-downs due to increased interest burdened with 370 million euros. The further sanctions against Russia resulted in value adjustments of 75 million euros, and the conversion of the plastics technology division Contitech had an impact of over 63 million euros. As already known, the group's sales from continuing operations in the months of April to June rose by 13 percent to 9.4 billion euros.

"We are not satisfied with the current result," said Dürrfeld, looking at the loss. The group has taken numerous measures to reduce costs and stabilize supply chains. This includes distributing purchasing across multiple sources and building safety stocks. The group conducts price negotiations with customers with the aim of jointly bearing the costs. Continental is also concentrating on business with products from which the group earns more – such as premium tires.

For the second half of the year, however, Continental remains confident and is sticking to its outlook. Group CEO Nikolai Setzer referred to the high order intake in the automotive supplier division of over six billion euros. Group sales are expected to be between EUR 38.3 and 40.1 billion in 2022. Last year, group sales collapsed to 33.8 billion euros. The group assumes that the global supply chains will stabilize in the coming months, that semiconductors will become more readily available again and that the energy supply will remain stable.

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