Continental beats expectations with 4.4% margin in Q2

BERLIN (Reuters) -Continental reported better-than-expected sales of 9.4 billion euros ($9.63 billion) in the second quarter on Wednesday with an adjusted earnings margin of 4.4%, slightly above analysts’ expectations of 4.2%.

The car parts supplier, which in May cut its earnings forecast to 4.7%-5.7% from 5.5-6.5%, confirmed the lower outlook in preliminary results ahead of its half-year report on August 9.

Second-quarter sales came in slightly above the first quarter’s 9.3 billion euros.

Sales in the second quarter of last year, before the company spun off its powertrain division in September, reached 9.9 billion euros with a 7.2% margin.

Continental warned in March of a subdued start to 2022 and that war in Ukraine could have lasting consequences on its supply chain.

In April it said it was in talks with customers to raise prices to cover its own rising costs.

Automakers from Volkswagen to BMW have reported lower sales in the first half of this year, and Europe registered the lowest number of new car registrations since 1996.

Continental’s automotive group sector, which the company cautioned in April could end up in the red this year, reported a negative adjusted EBIT margin of -2.3%, while its tyres division reported its highest margin at 13.8%.

The company recognised impairments in the automotive sector of 370 million euros, it said, with an additional 75 million euros of assets in Russia subject to impairment due to sanctions, mainly in the tyre sector.

Adjusted free cash flow for the Group came in at minus 687 million euros, the supplier reported, well below an analysts’ consensus of minus 225 million euros.

($1 = 0.9766 euros)

(Reporting by Victoria Waldersee; editing by Miranda Murray and Jason Neely)