March 5, 2020 / 7:54 AM / a month ago

Continental reports 1.2 billion euro 2019 net loss hit by car demand slump

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

FRANKFURT/BERLIN (Reuters) - German car supplier Continental (CONG.DE) said it would step up cost savings after posting a 1.2 billion euro ($1.34 billion) net loss in 2019, sending shares sharply lower as analysts criticised management’s handling of an industry downturn.

Cost cut plans will be presented in May because worldwide car production was now expected to fall for the third year in row, by between 2 %to 5%, Chief Executive Elmar Degenhart said on Thursday, adding that forced redundancies may be necessary.

Continental announced non-cash goodwill writedowns of 2.5 billion euros and said it expected to deliver and adjusted earnings before interest and taxes (EBIT) margin of 5.5% to 6.5% this year, disappointing analysts.

“Conti remains a very large company which is not moving fast enough in this rapidly declining volume environment based on a legacy cost structure designed for volume growth,” analysts at Evercore ISI said in a note on Thursday.

Continental reported an almost flat full-year revenue at 44.5 billion euros, slightly below a 44.55 billion euros estimate based on Refinitiv data.

Adjusted earnings before interest and taxes (EBIT) was down 21.5% to 3.2 billion euros in 2019.

Degenhart said potential supply chain disruptions, caused by coronavirus travel restrictions, had been avoided by switching from shipping parts to using air freight. Production and logistics were expected to normalise in the second quarter of the year, he added.

Reporting by Edward Taylor and Riham Alkousaa; Editing by Michelle Martin

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