Continental shares fall as 2023 profits and sales miss estimates

(Sharecast News) - Full-year results at German auto parts manufacturer Continental came in below expectations on Thursday despite the company hiking its dividend after operating profits rose by nearly a third. Adjusted earnings before interest and tax rose 31.6% to €2.5bn in what it said was a "challenging" 2023. The adjusted EBIT margin increased to 6.1% from 4.9%.

Net profits swelled to €1.16bn, from just €67m the year before, but missing the €1.35bn consensus forecast.

"The geopolitical situation, additional inflation-related costs of around €1.4 billion, exchange-rate effects and high costs for special freight all had a considerable impact on performance," Continental said in a statement.

Nevertheless, chief executive Nikolai Setzer said the company achieved its goals for the year and "made improvements toward achieving our mid-term targets".

Sales rose 5.1% year-on-year to €41.4bn, slightly behind the €41.7bn market estimate, with automotive sales jumping 10.8% to €20.3bn.

Adjusted EBIT margins in the automotive division also improved significantly to 1.9% from -0.3% in 2022, due to higher production efficiency thanks to a more stable material supply, strict cost discipline and a lower special freight volume, Continental said.

Adjusted free cash flow totalled €1.3bn, up from €200m the year before, while the dividend was lifted to 220 cents, up from 150 cents previously.

For the current financial year, Continental said that passenger car and light commercial vehicle production would be broadly stable, after a 10% increase in 2023, which will keep a lid on tyre-replacement growth, while higher labour costs will weigh on earnings.

"Based on these assumptions and given the exchange rates at the beginning of the fiscal year, Continental anticipates consolidated sales for 2024 of around €41.0 billion to €44.0 billion and an adjusted EBIT margin of around 6.0 to 7.0 percent," the company said.

Shares were down 1.3% at €71.86 in afternoon trading in Frankfurt.