Continental announced plans to increase its dividend following a significant surge in net profit driven by improved production efficiency and stabilized supply chains.
In 2023, the German car-parts manufacturer reported a substantial rise in net profit to €1.16 billion, compared to €66.6 million the previous year. While analysts had anticipated slightly higher net profit at €1.35 billion, according to a poll from Visible Alpha, the company’s performance marked a notable improvement. Group sales also experienced growth, reaching €41.42 billion, up from €39.41 billion in the previous year, with the automotive division contributing to this increase with an 11% rise in revenue. However, sales slightly missed the Visible Alpha consensus of €41.66 billion.
Continental attributed the performance to various factors, including the geopolitical situation, additional inflation-related costs amounting to approximately €1.4 billion, exchange-rate effects, and high expenses for special freight.
The proposed dividend stands at €2.20 per share, a notable increase from €1.29 in 2022. Adjusted earnings before interest and taxes (EBIT) rose to €2.52 billion from €1.95 billion, with the adjusted EBIT margin reaching 6.1%, up from 4.9% in 2022. Additionally, adjusted free cash flow for 2023 amounted to €1.29 billion, benefiting from improved operating earnings and a reduction in inventories and receivables.
Looking ahead, Continental anticipates global production of cars and light commercial vehicles to fluctuate between -1% and 1% in the current year. The company also expects higher personnel costs, amounting to around €500 million, to impact earnings results, along with the effects of exchange rates.
Continental has provided its sales forecast for the upcoming period, estimating group sales to range between EUR41 billion and EUR44 billion. The tire manufacturer aims to achieve a group adjusted EBIT margin of 6%-7%, with significant improvements expected due to cost-cutting initiatives, pricing adjustments, and efficiency measures. As part of its restructuring program, Continental plans to eliminate more than 7,150 jobs.
The company expressed its targets for the current year, anticipating sales growth and an increase in the adjusted EBIT margin for the Continental Group. Despite anticipated high special expenses, Continental expects the corridor for adjusted free cash flow to only slightly decrease compared to the previous year. Katja Garcia Vila, Chief Financial Officer of Continental, emphasized that adjusted free cash flow is projected to range between EUR700 million and EUR1.1 billion by the end of the year. Additionally, the company plans to allocate capital spending before financial investments to be within 6% to 7% of sales.