US and Chinese Markets Supported Growth in Continental Financials

Continental AG Tire Business Division operating profit for Q3 2020 grew nearly 18% on virtually flat sales, driven by strong performance in China and the US.

Agreed operating income rose 17.6% year-on-year to $577 million, and sales decreased 0.5% to $3.36 billion, bringing the operating margin up three percentage points to 17.1%.

"China continues to lead with 11 percent year-on-year [car production] growth, and North American production was only slightly above the previous year," said Wolfgang Schaefer, Chief Financial Officer of Conti. Europe, he said, "remains a lagging region with negative figures of -8%, while key markets in Germany and France fell 16% and 23%, respectively." The growth in demand for tires, said Wolfgang Schaefer, basically corresponded to the level of car production. In replacement markets, Conti is seeing a "gradual recovery"; for example, third-quarter replacement tire sales in China significantly exceeded last year's level, and the North American market returned to last year's level.

Demand in Europe is improving, but at a slower pace than in other regions, reflecting the low demand for winter tires.

In the first nine months of 2020, adjusted profit for the Conti tire division fell 36.2% to $893 million on a 16.2% decline in sales to $8.18 billion.

Sales of consumer-grade tires to automakers were well below the same period in 2019, while sales of commercial and consumer-grade tires also fell short of last year's levels, according to the German company.

For the third quarter of the year, Continental AG as a whole reports an increase in operating income to $972 million on the back of a 7.2 percent decline in sales to $12 billion.

Continental CEO Elmar Degenhart said the company achieved "generally good" quarterly results despite a highly volatile market environment.

“From an operational point of view, we performed very well in the third quarter,” Degenhart said. "The measures that we took at the very beginning of the coronavirus pandemic have been fully effective."