August 7, 2019 / 7:03 AM / 4 months ago

Continental AG seeks deeper cost cuts as profit drops

BERLIN (Reuters) - Continental AG (CONG.DE), Europe’s largest listed automotive supplier by revenues, said it was seeking deeper cost cuts after second-quarter net profit fell 41%, hit by lower vehicle demand in China and steep investments for electric and autonomous cars.

FILE PHOTO: Logo of German tyre company Continental is seen before the annual news conference in Hanover, Germany March 2, 2017. REUTERS/Fabian Bimmer

"We are responding to the declining market by ensuring rigorous cost discipline and enhancing our competitiveness," CEO Elmar Degenhart said in a statement here

Degenhart, who has been at the helm of the Hanover-based company since 2009, pointed to a “highly challenging” market with falling car sales in Europe, North America and China.

“The resulting need for action is currently being discussed with employee representatives, with the aim of drawing up a plan together in the coming weeks on how to proceed,” Degenhart added.

The company did not initially provide details on the volume of the envisaged cuts and where they could occur, while adding it had decided not to build up a battery cell production.

Continental sees no economic rebound in the short or medium term, it said. “For the second half of the year, we do not expect the headwind to ease,” Finance Chief Wolfgang Schaefer said.

The company confirmed, however, its full-year outlook, which it had lowered last month, citing an expected decline in global vehicle production.

In the second quarter, net profit declined by 41% to 485 million euros ($543 million) while revenues were down 1% and came in at 11.26 billion euros.

Weakness in the car industry had already led Continental’s rival ZF Friedrichshafen to issue a profit warning while Europe’s largest supplier Bosch expects sales to stagnate this year.

Continental's shares were up 0.2% at 0711 GMT while Germany's bluechip DAX index .GDAXI rose 0.7%.

Reporting by Thomas Seythal; Additional reporting by Jan Schwartz in Hamburg; Editing by Michelle Martin and Edward Taylor

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