Continental Presents Strategy to Achieve Mid-term Targets

2024-05-04 01:09:08 Automotive

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At today?s Capital Market Day in Hanover, Continental announced its strategy for increasing value creation. To achieve its mid-term targets, the company will adopt a package of cost-reduction measures. It thus aims to achieve a consolidated adjusted EBIT margin of around 8 to 11 percent in the next two to three years and then improve within this range. The company has also sharpened its sales expectations. In the short term (two to three years), Continental aims to achieve total sales of around ?44 billion to ?48 billion. In the medium term (three to five years), it expects total sales to be around ?51 billion to ?56 billion (outlook for 2023: around ?41 billion to ?43 billion). It will also carve out parts of the business and carry out further portfolio reviews. Furthermore, the DAX-listed company is increasing the corridor for dividend distributions to around 20 to 40 percent of net income (previously: around 15 to 30 percent).
In the Automotive group sector, Continental will step up its focus on value-creating business areas with high growth. In doing so, the group sector will prepare for the User Experience business area to become organizationally independent. This step will open up new strategic options for the displays and HMI controls business. The technology company is also reviewing measures for further business activities within Automotive that are expected to contribute around ?1.4 billion to consolidated sales this fiscal year.
In the Tires group sector, Continental will continue to rely on stable earnings and operational excellence. Sustainability, electric mobility and digital tire services will also create various opportunities for further profitable growth. In its ContiTech group sector, Continental will focus on reliable profitability thanks to material solutions made from rubber and plastics. At the same time, the company will strengthen its strategic focus on the group sector?s industrial business with the aim of increasing its share of ContiTech?s sales from currently around 55 percent to 80 percent.
?Our strategy aims to increase our value creation. This will allow us to continue to develop into the mobility and material technology group for safe, smart and sustainable solutions,? said Continental CEO Nikolai Setzer on Monday in Hanover, adding: ?There are good reasons to invest in Continental. We have a clear strategy to achieve our mid-term targets. We will invest specifically in those areas with value creation upside and expand our technology position wherever this gives us an edge over the competition. Our three group sectors make up a balanced and resilient portfolio, which we and our highly effective and efficient team will manage flexibly, proactively and with foresight.?
Referring to the company?s development over the past few years, Setzer added: ?After a long period of success, we have more recently had to face many challenges, and our results have not always met our expectations. At the same time, however, this extremely challenging time has also made us more robust. We are therefore entering this next phase of increased value creation in a strong position.?
Sharpened mid-term targets (selection):
Continental Group Automotive Tires ContiTech
Sales
around ?51 billion to ?56 billion
(not previously specified) around ?26 billion to ?29 billion
(not previously specified) around ?17 billion to ?18 billion
(not previously specified) around ?8 billion to ?9 billion
(not previously specified)

Adjusted EBIT margin1
around 8 to 11 percent around 6 to 8 percent around 13 to 16 percent
(previously: 12 to 16 percent) around 9 to 11 percent

Return on capital employed2
more than 20 percent
(previously: around 15 to 20 percent) more than 20 percent
(previously: more than 15 percent) more than 23 percent
(previously: more than 20 percent) more than 22 percent
(previously: more than 20 percent)
1 EBIT before amortization of intangible assets from purchase price allocation (PPA), changes in the scope of consolidation, and special effects.
2 Ratio of EBIT to average operating assets for a fiscal year.

At the Capital Market Day, Continental CFO Katja Garcia Vila confirmed the current outlook for fiscal 2023 and emphasized: ?Achieving our mid-term targets is a priority. To do so, we have a clear plan that we will implement rigorously. With our planned measures, we will reach the corridor for our expected mid-term adjusted EBIT margin in the next two to three years and then continue to improve within this range.? Garcia Vila added: ?Our vision is to create value for a better tomorrow. The foundation for this is a strong balance sheet and strong free cash flow. We are keeping both firmly in sight. And all of our stakeholders will benefit. We are underlining the importance of our shareholders with our updated dividend policy.?