Technology company Continental released its 2018 half-year results in Hanover, recently. The Dax-listed company accelerated its growth in the second quarter of 2018 and once again grew faster than its relevant markets. After six months, organic sales growth amounted to 5.4 %, with all five divisions making a contribution. In the same period, the Automotive business was up 6.6 % in organic terms. It was thus able to grow nearly 5 percentage points faster than the global production of passenger cars and light commercial vehicles, which was up by about 2 %. For the current year, the company still expects the global production of passenger cars and light commercial vehicles to rise by more than 1 %.

In the first half of the year, Continental upped its sales to €22.4 billion and posted an adjusted operating result of €2.2 billion. This corresponds to an adjusted EBIT margin of 10 %.

“Our technological strength underpins our rapid and profitable growth. It makes mobility around the world safe, clean and intelligent. It is pioneering for the mobility of the future and vital for our long-term success in an environment characterized by change and uncertainty,” said Continental CEO Dr. Elmar Degenhart while presenting the business figures for the first half of 2018.

He added, “Our profitable growth in the second quarter is further proof of our strength. In addition, the high order intake in the field of electric mobility is also quite gratifying and demonstrates that our product portfolio is fit for the future.”

In the first half of the year, more than €1 billion in orders were received for products and systems for hybrid and electric cars. At over €20 billion, order intake continues to be at a record level in the entire automotive sector after six months.

Sales growth was up in particular in the Powertrain division in the second quarter. “Our future alignment is paving the way for Powertrain as well as the other divisions to continue to outpace our relevant markets in the future as well, as part of our values alliance for top value creation,” he said, making reference to the recently announced realignment of the company.

Degenhart was also pleased with the quarterly results of the Tire division, which had been impacted by exchange-rate effects in the first three months. Its adjusted EBIT rose from 15.2 % in the first quarter to 17.8 % in the second quarter. “Our tire business was back up again in the second quarter, maintaining its profitable position on the global market,” said Degenhart, summing up the positive development.

Solid growth in all divisions; further substantial investments in the mobility of tomorrow

“As expected, all five divisions posted good organic growth. In light of this, we are satisfied with our sales development in the first half of the year,” said CFO Wolfgang Schaefer, commenting on the past half-year. With regards to the results, he added, “The industry is currently undergoing radical technological change. It is all about automation, connectivity and electrification. Looking at our results, the trend reflects the substantial investments we have made in the development of these future technologies. The increase in order intake has in recent years also resulted in start-up costs.” In the last half-year, the technology company spent €2.9 billion on investments as well as on research and development. According to Schaefer, there are only a few companies worldwide that are pushing developments in the field of mobility to this extent.

Looking ahead to the remainder of the year, Schaefer pointed out that the third quarter is traditionally impacted by seasonal effects: “Carmakers close down plants for vacation in the third quarter. Furthermore, next quarter will probably be negatively impacted by the new test procedure WLTP.” At present, Continental is expecting a strong quarter at the end of the year, and is therefore confirming its outlook for the full business year.

After the first six months, net income attributable to the shareholders of the parent rose by 4.3 % to around €1.6 billion, after €1.5 billion in the same period of the previous year. Free cash flow in the first half of 2018 amounted to €122 million, after €292 million in the first half of last year. This was mainly due to the increase in working capital as a result of the solid growth. Free cash flow before acquisitions amounted to €296 million after six months. The Automotive Group increased its sales by 2.8 % in the past half-year. Organic growth was 6.6 %. Sales amounted to €13.8 billion in this period. The adjusted EBIT margin was 8.1 %. In the first six months, the Rubber Group achieved sales of €8.6 billion, down slightly year on year. There was organic growth of 3.6 % in the first half of 2018.

In the first half of the year, Continental invested €1.2 billion in property, plant and equipment, and software. This corresponds to a capital expenditure ratio of 5.2 % (previous year: 5.3 %). The technology company’s net expenditure for research and development was €1.7 billion, which equates to 7.7 % of consolidated sales. In the same period of the previous year, the ratio was 7.2 %.

As at June 30, 2018, net indebtedness was just short of €2.9 billion, up €811 million from the end of 2017. The increase in net indebtedness in the period under review is due mainly to the payment of the dividend for the last fiscal year totaling €900 million. The gearing ratio, which is an indicator of indebtedness, rose accordingly from 12.6 % at the end of 2017 to 16.8 % as at the reporting date. Continental had liquidity reserves totaling 5.8 billion as at the reporting date.

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