Continental tops profit forecast as price hikes offset costs

By Victoria Waldersee

BERLIN (Reuters) -Auto parts supplier Continental beat expectations on Thursday with a 47% jump in third-quarter operating profit as price hikes and a strong recovery in auto production offset rising energy and logistics costs.

Shares in the German company were up more than 4% after it reported adjusted earnings before interest and tax of 605 million euros ($605 million) for the quarter, topping the mean forecast of 519 million in a company poll of 10 analysts.

It maintained guidance for full-year revenue of 38.3 billion to 40.1 billion euros, and an adjusted earnings margin of 4.7-5.7%, just below the third-quarter’s 5.8%.

Global automotive production is recovering from drastically reduced output, both in the second quarter of this year after Russia’s invasion of Ukraine and last year’s third quarter, when supply chain snags hit the industry hard.

Production rose 11.1% compared to last quarter and 27.5% compared to the third quarter last year, Continental said.

But higher interest rates and valuation effects led to a quarterly net loss of 211 million euros. Higher procurement costs, a build-up of inventories and capital expenditure also led to a negative adjusted free cash flow, as in the same quarter last year.

“In light of the challenging environment, we did well to achieve our third-quarter forecast, but our financial results are not in line with our medium-term targets. However, we are on the right track and our order intake remains high,” Chief Executive Nikolai Setzer said.

Measures taken to mitigate rising costs include passing on higher prices to customers and spreading raw materials purchasing across multiple suppliers, the company said.

Continental saw a heavy loss in the second quarter but said at the time it expected higher auto production in the second half of the year as supply chains and semiconductor availability improve.

($1 = 0.9996 euros)

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