Continental is revising its guidance for fiscal year 2018 with the company experiencing lower sales expectations, cost increases and warranty claims.
Despite these effects, Continental said it still expects to grow faster than its relevant markets. Its revised sales guidance for fiscal 2018 including all expected negative exchange-rate effects amounts to about €45 billion ($52 billion). In comparison to sales in 2017, organic growth of more than 4% is anticipated, the company said. It is expecting an adjusted EBIT margin of more than 9% in 2018.
Its lower sales guidance for this year is a result primarily of two developments. First, its original equipment business has fallen short of expectations, especially in Europe and China in the automotive divisions as well as in the ContiTech division. Second, weak demand in the tire markets in both regions has led to lower sales expectations, the company said in a statement.
Development costs rose in the automotive group due to the high order intake, which reached a record level of more than €20 billion ($23 billion) in the first half of the year. Additional burdens resulted from start-up costs in the ContiTech division as well as from higher costs in the powertrain sector due to the transition to products and systems for hybrid and electric vehicles, the company said. Continental said it has taken initiatives to cut production costs and is adapting its planned investments to the lower sales expectations.
For the third quarter, the company is currently expecting sales of about €11 billion ($12.8 billion) and an adjusted operating result (adjusted EBIT) of more than €700 million ($811 million) for the corporation as a whole. The fourth quarter will also be affected by these factors, the company says.
For Continental’s Rubber Group sales are predicted to be about €17.5 billion ($20 billion), while previously they were predicted to be about €18 billion ($20.8 billion). This includes negative exchange-rate effects of about €500 million ($580 million).
Continental will publish the results for the first nine months of 2018 on Nov. 8.
