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Outlook on Sales and Adjusted-EBIT Margin for Fiscal 2019

Continental AG has decided to publish its expectations for business development in a fiscal year in terms of ranges, in accordance with industry custom. The increasingly volatile market conditions and profound technological changes in the automotive industry make it ever more difficult to precisely forecast the business development over a one-year period.

Based on current market expectations for the current fiscal year, Continental expects consolidated sales in the range of approximately €45 to €47 billion and an adjusted EBIT margin in the range of approximately 8% to 9%.

In comparison, according to preliminary key data, fiscal 2018 sales were around €44.4 billion and the fiscal 2018 adjusted EBIT margin was around 9.2%. With average analyst estimates for the current fiscal year’s adjusted EBIT margin at approximately the same level as the preliminary adjusted EBIT margin for 2018, substantial parts of the expected adjusted EBIT margin range for the current fiscal year therefore lie below analyst expectations.

Continental will release its full outlook for the current fiscal year as well as preliminary 2018 business figures on March 7, 2019, as part of its annual financial press conference to be broadcasted online.

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Revision of Guidance for Fiscal 2018

Hanover, August 22, 2018. Lowered sales expectations, cost increases and warranty claims are decreasing the adjusted operating result (adjusted EBIT) in the third quarter of 2018. At present, sales of about €11 billion and an adjusted operating result (adjusted EBIT) of more than €700 million are expected for the corporation for the period from July 1 to September 30, 2018.

The aforementioned factors will also impact the fourth quarter, making it necessary to revise the guidance for 2018 as follows:

  • Consolidated sales this year will amount to approximately €46 billion before exchange-rate effects. We previously expected a figure of around €47 billion. We currently estimate that exchange-rate effects will negatively impact sales by about €1 billion in 2018. Previously the impact was estimated at more than €1 billion. After this revision, the adjusted operating result (adjusted EBIT) will be more than 9%. More than 10% was previously forecast.
  • In the Automotive Group, we expect to achieve sales of approximately €28 billion before negative exchange-rate effects, instead of about €28.5 billion as had been previously forecast. We currently estimate that exchange-rate effects will negatively impact sales in the Automotive Group by about €0.5 billion in 2018. The adjusted EBIT margin for the Automotive Group will be about 7% in 2018. Previously, around 8.5% had been forecast. Warranty claims will reduce the reported and the adjusted EBIT by a total of €150 million.

  • In the Rubber Group, we expect to achieve sales of around €18 billion before negative exchange-rate effects, instead of about €18.5 billion as was previously forecast. We estimate that exchange-rate effects will negatively impact sales in the Rubber Group by about €0.5 billion in 2018. The adjusted EBIT margin for the Rubber Group will be more than 13% in 2018. More than 14% was previously forecast

  •  We are reducing the guidance for free cash flow before acquisitions and before the outflow for the funding of the U.S. pension plans from about €2 billion to around €1.6 billion in 2018.

  • The other elements of the guidance issued on August 2, 2018, remain unchanged, namely the impact from higher raw material costs amounting to more than €50 million, the negative financial result of less than €180 million, the tax rate of approximately 25%, the negative special effects of €50 million, the amortization from purchase price allocations of approximately €180 million, and the capital expenditure ratio before financial investments of around 7%.

Furthermore, for Powertrain the figures estimated in April 2017 for 2019 sales (€10 billion) and EBIT (€850 million) will no longer be achieved. They will be updated and revised in the course of the carve out of the division.

The financial report for the first nine months of 2018 will be released on November 8, 2018.


 “Adjusted EBIT” and “EBIT” are defined in the Glossary of Financial Terms on pages 38 and 39 of the 2017 Annual Report, which is available at www.continental-ir.com.

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Continental Realigns for Future Mobility

Hanover, July 18, 2018. On January 9, 2018, as market rumors arose, Continental AG confirmed in a notification required under section 17 (1) MAR that it is in the early stages of analyzing how its organization could become even more flexible in response to the fast changing environment in the automotive industry.

After completion of the analysis, the Executive Board of the technology company decided today to undertake one of the largest organizational realignments in the company’s history.

The decision provides for the creation of a holding structure of Continental AG under the new “Continental Group” umbrella brand. The holding structure will be supported by three pillars, the “group sectors” Continental Rubber, Continental Automotive and Powertrain. The new names and the corresponding reporting structure will be applied starting 2020. The group sectors will be established, or adjusted where necessary, step by step. This realignment requires the approval of Continental AG’s Supervisory Board, which is to be obtained on July 26, 2018. The Supervisory Board’s approval is also required for the carve-out of the current Powertrain division into an independent entity under a new name by the beginning of 2019. Its partial public offering (IPO) is presumably possible beginning mid-2019.

Furthermore, the current Chassis & Safety and Interior divisions will be reorganized by the beginning of 2020. They will become two business areas newly named “Autonomous Driving Technologies” and “Vehicle Networking Technologies”. Their business results will be reported in the new group sector Continental Automotive. Both business areas will be supported by a newly created central Automotive Research and Development function.

The independent organizational structure of the two current Tires (“Tire Technologies” in the future) and ContiTech divisions will remain unchanged. Their business results will be reported under the future Continental Rubber group sector.

Powertrain business aligned to meet the requirements of markets and customers

Subject to the approval of Continental AG’s Supervisory Board, the Powertrain division will be carved out into an independent business area under a new name by the beginning of 2019. In addition to the combustion engine business, this new entity will also be in charge of all business of the future involving hybrid and electric drive systems, as well as current battery activities. This includes, for instance, the joint venture for 48-volt battery systems recently announced. At the same time, Continental is preparing a partial IPO for the new Powertrain company, which could take place starting mid-2019. Continental does not, however, plan to relinquish control of the Powertrain business in the medium or long term. Andreas Wolf is to assume responsibility for the new Powertrain company at the beginning of 2019. He is currently in charge of the Body and Security business unit in the Interior division.

The carve-out of the Powertrain group sector will lead to estimated operational costs of approximately €350 million. A large part of the operational costs will be incurred in 2018 and 2019. There will also be negative tax effects totaling about €100 million. These will be incurred primarily in 2019. The outlook for the Continental Corporation for 2018 is unaffected by this.

The key points agreed upon with the employee representatives in “Continental in Motion – our Alliance for the Future” on April 18, 2018, apply to the planned organizational changes at Powertrain.

The reason for creating a new independent entity is the foreseeable change in the powertrain business. The way the market evolves will largely be determined by political demands regarding emission limits. The pace at which political decision-makers are pushing regulations varies, particularly in key markets, including Europe, North America and China, as well as Japan and South Korea, and growth markets such as India. This requires a great deal of flexibility on the part of the industry in order to be able to react quickly to the individual needs of the various markets, regulatory authorities, societies and customers.

Reorganization of the Chassis & Safety and Interior divisions

The business and activities of the two other current Automotive divisions Chassis & Safety and Interior will be realigned with the changing requirements and future opportunities of the markets. By the start of 2020, these operations will be organized in two newly formed business areas with the names “Autonomous Driving Technologies” and “Vehicle Networking Technologies”.

The Autonomous Driving Technologies business area will include automated and autonomous driving as well as all chassis functions. The Vehicle Networking Technologies business area will deal with a vehicle’s internal connectivity as well as its external connectivity with other vehicles and traffic infrastructures. The details are expected to be worked out and announced by mid-2019.

With this reorganization, Continental is above all pursuing the goal of gearing its business with pioneering technologies toward continuing profitable growth, while exploiting this and future growth opportunities faster and more efficiently. In its new automotive business (without the Powertrain division), the technology company expects to increase sales from about €19 billion in 2017 to approximately €30 billion in 2023.

The creation of a central Automotive R&D function will support the realignment of the automotive business. In this new function, development activities of the current Interior and Chassis & Safety divisions as well as the R&D operations of the current central functions will be integrated, where they will play a more crucial role and be strengthened at the operational level. Approximately 12,000 to 15,000 software and hardware engineers will join together in a global Continental powerhouse for advanced development and application engineering. In addition, about 17,000 engineers will remain in the two new business areas Autonomous Driving Technologies and Vehicle Networking Technologies.

Rubber group: Continental retains ownership of its nucleus

The Tire and ContiTech divisions currently make up the Rubber Group, which in the future will be reported under the new name “Continental Rubber Group Sector”. The two business areas will continue to specialize in the development of technology products based upon rubber and plastics.

This business, which is the nucleus and origin of the 147-year-old Hanover-based company, will continue to be owned by Continental. The sale of a minority interest, in the form of an IPO for example, is not planned at present, but is an option for the future. Several years ago Continental already prepared a possible transformation of this business into an independent entity. No further steps are necessary for this at present.

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Change of Outlook for FY 2018

Exchange rate and inventory valuation effects will impact earnings by around €150 million in H1 2018. This negative impact affects primarily the tire business. Accordingly, the adjusted operating result (adjusted EBIT*) for Q1 2018 in the Rubber Group will be about €100 million lower than in the respective period of the prior year.

At present, we do not assume that we will be able to compensate for these negative effects in the Rubber Group over the course of the year. We are therefore lowering our outlook for the adjusted EBIT margin of the Rubber Group from about 15% to more than 14% for 2018.

For the corporation, this also results in a decrease in the forecast of the adjusted EBIT margin from about 10.5% to more than 10%. All other elements of the outlook we published on March 8, 2018 remain unchanged.

Continental will publish initial key data (consolidated sales and EBIT*) for Q1 2018 on the occasion of its Annual Shareholders’ Meeting on April 27, 2018. The financial report for Q1 2018 will be published on May 8, 2018.


„EBIT adjusted“, “EBIT” as defined in the annual report 2017, pp 38/39 (Glossary of financial terms). Download under www.continental-ir.com

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Continental Confirms Media Reports

We confirm that we are in the early stages of analyzing how our organization can become even more flexible in response to the fast changing environment in the automotive industry. In this process we are supported by external advisors. As of today it is wide open, if and which changes could result from these early evaluations. To date there are no plans which could be submitted for approval.

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Continental Changes Outlook for Fiscal 2016

EBIT of the Automotive Group is expected to be significantly lower than the previous year’s level.

  • Potential expenditure for warranties and pending antitrust proceedings and
  • the aftermath of three earthquakes in Japan as well as high R&D advances

will have a negative impact on Automotive Group’s reported and adjusted EBIT for fiscal 2016 of around €480 million and on the corporation’s outlook, which was last changed on August 3, 2016.

Hanover – Over the past few days, several isolated circumstances have resulted in the following situation:

The Chassis & Safety and Interior divisions are anticipating a negative impact of around €390 million due to warranties for products, the majority of which were supplied between 2004 and 2010, and due to  potential expenditures for pending antitrust proceedings.

The situation of one of our microcontroller suppliers has become even worse due to the latest earthquake on August 31, 2016, in the Kumamoto region of Japan. As a result, the Interior division is anticipating a loss in sales in the current year amounting to at least €100 million (previously expected: €50 million). EBIT will be impacted by around €50 million due to special cargos, product adjustments and increased manufacturing costs.

R&D advances which are higher than expected further impacted the Interior and Powertrain divisions by roughly an additional €60 million. Consequently, the adjusted EBIT margin of the Powertrain division in 2016 will be below the previous year’s level of 5.7 percent.

These burdens can only be partially absorbed. In aggregate, these circumstances result in a negative effect on the Automotive Group’s reported and adjusted EBIT of around €480 million.

Effects on the outlook for the corporation, which was previously amended on August 3, are as follows:

  • Despite the situation in Japan, the sales forecast for the corporation is still confirmed at around €41 billion before exchange-rate effects
  • The adjusted EBIT margin for the corporation will be over 10.5 percent in the current year (previously over 11 percent)
  • The sales forecast for the Automotive Group is confirmed at around €25 billion before exchange-rate effects
  • The outlook for the adjusted EBIT margin of the Automotive Group has been lowered to over 6.5 percent (previously over 8.5 percent)The outlook for the adjusted EBIT margin of the Automotive Group has been lowered to over 6.5 percent (previously over 8.5 percent)
  • The outlook for the Rubber Group (sales over €16 billion before exchange-rate effects and adjusted EBIT margin over 17 percent) is confirmed
  • All remaining elements of the outlook (negative special effects amounting to around €100 million, negative net interest result better than €250 million, corporation tax rate below 30%, capital expenditure ratio before financial investments at around 6% of sales, and free cash flow before acquisitions of at least €2 billion) are confirmed.
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Continental to acquire Veyance Technologies Inc. from The Carlyle Group

Continental AG, Hanover, Germany, has signed an agreement to acquire Veyance Technologies Inc., Fairlawn Ohio, USA, for 1.9 billion US-Dollar. The business of Veyance comprises engineering, manufacturing and selling products made of rubber and plastics, predominantly for industrial applications.

In 2013, Veyance Technologies Inc. has generated revenues of approximately 2 billion US-Dollar, of which more than 50% are allocable to the NAFTA-Region. The business has approx. 9,000 employees and has their main production and engineering facilities in the U.S., Canada, Mexico, South America and China. It produces and supplies, inter alia, conveyor belts, industrial hoses, air spring systems and power transmission belts. The business generated an EBITDA of 270 mn US-Dollar in 2013.

Upon closing of this transaction, the acquired business is planned to be integrated into Continental´s  ContiTech Division, which generated according to preliminary data revenues of 3.9 bn € and an EBITDA of 576 mn € in 2013.

The transaction is subject to merger control clearance.

Hanover, February 10, 2014


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Termination Investor Agreement

The Schaeffler Group notified us today of the termination of the Investment Agreement dated August 20, 2008. This Agreement was concluded between Continental AG on the one hand and the Schaeffler Group and its shareholders on the other hand, with former German chancellor Dr. Gerhard Schröder as guarantor. The Investment Agreement will therefore expire at the end of May 13, 2014

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Ad hoc: Dividend Proposal

In preparation of the Financial Statements for fiscal 2011, the Executive Board of Continental AG has decided to propose to the Annual Shareholders’ Meeting, scheduled for April 27, 2012 in Hanover, a dividend payment of €1.50 per share.

Based on the approximately 200 million shares outstanding, the proposed amount to be distributed totals roughly €300 million. In relation to the consolidated net income of the Continental Corporation attributable to the shareholders of Continental AG, the payout ratio is about 24%.

In its meeting on March 13, the Supervisory Board of Continental AG will resolve upon the adoption of the Financial Statements for fiscal 2011 and the dividend payment proposal for the Annual Shareholders’ Meeting. The Audit Committee has recommended to the Supervisory Board also to propose a dividend payment of €1.50 per share.

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Ad hoc: Half Year Results 2010

According to first preliminary figures, unaudited sales for the first half of this year increased by about 38% to approximately €12.5 billion (PY: €9,063.2 million). On this basis, adjusted EBIT (EBIT before amortization of intangible assets from PPA, changes in the scope of consolidation and special effects) is expected to amount to at least €1.2 billion (PY: €248.8 million). In the first half of 2010, special effects resulted primarily from the closure of the truck tire production in Hanover/Stoecken which amounted to €35 million. In 2009, special effects in the first six months amounted to €146.9 million. 

Based upon these preliminary results for the first half year 2010, the company believes that an increase of approximately 15% in consolidated sales to be realistic for 2010 (PY: €20,095.7 million). The adjusted EBIT margin for 2010 should be between 8.0% and 8.5% (PY: 5.8%). Based on current expectations, however, a burden of approximately €250 million is anticipated in the second half of 2010 alone resulting from the raw material costs which have been increasing since the beginning of the year (primarily natural rubber). 

The Continental Corporation’s financial report for the first six months is expected to be published on July 29, 2010.