FRANKFURT (Reuters) - Continental (CONG.DE) said on Tuesday that slower automobile production growth over the next five years had forced the car parts maker to book a 2.5 billion euro (£2.2 billion) impairment.
The auto industry slowdown has already prompted profit warnings from various suppliers, including Continental, in the past few months.
“We do not anticipate that global production of passenger cars and light commercial vehicles will experience any material improvement in the next five years, so we have revised our assumptions for the medium-term market development accordingly,” Chief Financial Officer Wolfgang Schaefer said in a statement.
A significant portion of the goodwill impairments stemmed from acquisitions made before 2008 with 724 million euros attributable to the Chassis & Safety business, 1.54 billion from interiors and 244 million euros to the powertrain division.
Continental said non-cash impairments of goodwill and other intangible assets were booked in the third quarter of 2019.
There will also be a restructuring charge of 97 million euros and further restructuring charges are likely to follow in the fourth quarter.
The Hanover, Germany-based company reiterated it would book a loss before interest and taxes (EBIT) and net income in the third quarter and a negative net income for the full year.
Separately Continental said consolidated sales in the third quarter were about 11.1 billion euros and its adjusted EBIT margin was about 5.6%. Sales in the Automotive Group were about 6.6 billion euros, with an adjusted EBIT margin of about 1.6%.
Continental also said it would no longer seek to raise capital via an initial public offering of Vitesco Technologies, but will continue with plans to split off and separately list the entire powertrain business, a step which would be submitted to a shareholder vote on April 30, 2020.
A stand-alone Vitesco would have a freer hand to participate in consolidation of the powertrain sector as the auto industry slowly shifts from combustion engines toward battery-driven powertrains.
“There are no talks,” CFO Schaefer said, commenting on potential discussions about alliances or deals among producers of combustion engines.
Continental has no plans to list or spin off other divisions, Schaefer also said.
Shares in Continental were up 3.5% at 1419 GMT.
Reporting by Edward Taylor and Tom Sims; Editing by Alexander Smith and Jane Merriman