Continental, the German automotive supplier and tire manufacturer, once again faced significant challenges in its automotive supply business in the first quarter. Despite the ambitious goals of CEO Niko Setzer, who had aimed for improvements in the current year, the Hanover-based company had to accept a loss. Continental announced this unexpectedly on Tuesday evening after the stock market closed. The losses were significantly higher than analysts had expected, which can be attributed to weak sales volumes, outstanding price negotiations with customers, and delayed product launches.
Compared to the previous year, the company's sales in the first quarter fell by 5 percent to 9.8 billion euros. The automotive division in particular recorded declines, resulting in an operating result that was almost 50 percent below the consensus estimate. The free cash flow also significantly missed analyst expectations.
Following that, on Wednesday, Continental's stock experienced a significant drop, losing 4.2 percent and falling to 62.74 euros, making it the lowest performer in the DAX. Since the beginning of the year, the stock has thus already lost 18.5 percent of its value.
Despite these challenges, Continental's management sticks to its annual targets, which now seem even more ambitious. For the current fiscal year, Continental still aims for a positive operating margin of 2.0 percent, compared with 5.6 percent in the previous year. This requires a significant margin improvement in the coming quarters.
Analysts are concerned about the company's ability to achieve these targets, especially given the weak performance in the first quarter. "The forecasts retained for 2024 will require a significant improvement in margins in the coming quarters. Investors will now be looking for evidence that the weakness in the opening quarter is due to pricing and not to a weak business per se," a trader commented.
Continental will release the detailed quarterly figures on May 8th, which will provide the market participants with further insight into the company's situation and potential strategies to address the ongoing challenges.
