July 23, 2019 / 9:52 AM / a month ago

Germany's Continental, Jungheinrich hit brakes as auto sector slows

FRANKFURT (Reuters) - A slowing auto sector prompted profit warnings from supplier Continental and paint systems producer Duerr late on Monday.

FILE PHOTO: The logo of Continental AG, a German automotive manufacturing company specialized in tyres, brakes and car safety products is pictured on a rim at the company's stand during the Hannover Fair in Hanover, Germany, April 25, 2016. REUTERS/Wolfgang Rattay

Jungheinrich (JUNG_p.DE) also lowered its outlook citing a downturn in the forklift truck sector.

It marked a fourth profit warning from Continental in 16 months, while French rival Faurecia on Tuesday stuck to its guidance.

“The main reason is the continued decline in the global production of passenger cars and light vehicles,” Continental said, adding that car production will likely drop by 5% rather than remain flat.

Despite the negative news Continental shares were up 4.6% at 0925 GMT.

“The market is telling us that in the short run, the worst has been priced in,” said Evercore ISI analyst Arndt Ellinghorst.

“The magnitude of the cut is worse than we were expecting and bodes poorly for the remainder of earnings season and 2020 outlooks.”

Continental is due to release earnings on August 7.

Duerr, which produces woodworking equipment and paint systems for the auto industry, said lower payment receipts from the auto sector had eaten into its free cashflow in the first half.

The company, which is due to release first-half results on August 7, said its EBIT margin guidance of 7%-8% for 2020 is under review.

Jungheinrich said there had been a sharp drop in customer investment.

“This is due to the gloomier macroeconomic environment and the related current developments in the market for material handling equipment,” said Jungheinrich, which is due to release results on August 8.

Reporting by Danilo Masoni in Milan, Edward Taylor in Frankfurt; editing by Jason Neely

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