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Earnings

Germany's Continental warns of further restructuring charges

FILE PHOTO: A tyre of German tyre company Continental is pictured before the annual news conference in Hanover, Germany,March 7, 2019. REUTERS/Fabian Bimmer

FRANKFURT (Reuters) - German auto supplier Continental CONG.DE warned on Wednesday of further restructuring expenses in the fourth quarter which will impact net income, but said it expected a positive free cashflow for 2020 even after the COVID-19 pandemic hit demand.

Last month, Continental said it would post a third-quarter loss after impairments and restructuring expenses and announced that its Chief Executive, Elmar Degenhart, would step down from Nov. 30 due to health issues.

“Further expenses for restructuring and asset impairments related to the ‘Transformation 2019-2029’ program are expected to be recognised in Q4 of 2020,” the supplier said, adding that the total amount remains unclear.

Restructuring measures will materially impact reported earnings before interest and taxes (EBIT) and net income attributable to shareholders, it said.

Continental issued a new outlook and said consolidated sales are expected to be around 37.5 billion euros ($44.35 billion) in 2020 and the adjusted EBIT margin around 3%.

Sales in the Automotive business areas are expected to total around 22 billion euros this year, and the adjusted EBIT margin in this business is anticipated to be around minus 1.5%, Continental said.

In the third quarter, revenue fell to 10.3 billion euros, down from 11.1 billion euros but adjusted EBIT rose to 832 million euros, down from 612 million in the same period last year.

The company narrowed its loss before interest and taxes to 673 million euros, from an EBIT loss of 1.971 billion a year earlier.

($1 = 0.8456 euros)

Reporting by Edward Taylor; Editing by Michelle Adair and Alexander Smith

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