Continental Sales Beat Estimates, But Car Supplier Is Wary
Continental Sales Beat Estimates, Though Car Supplier Is Wary
(Bloomberg) -- Continental AG climbed in Frankfurt trading after reporting better-than-expected second-quarter results as demand picked up during the period, though it refrained from giving a fresh outlook for the year.
Sales fell almost 40% to 6.62 billion euros ($7.6 billion), the German car-parts giant said late Monday, citing preliminary figures. Analysts on average were expecting revenue to drop to 6.37 billion euros, according to data compiled by Bloomberg.
Although business “showed substantial improvement through the course of the second quarter,” Continental said in a statement, it remains “difficult to gauge possible adverse consequences on production, the supply chain and demand.”
Continental and its peers rushed to drastically slash costs when shutdowns aimed at containing the spread of the coronavirus hit auto factories and showrooms, halting production and significantly curbing sales. The company announced in June that it would cut its dividend payout to save about 350 million euros.
Continental rose as much as 4.2% in early Frankfurt trading, the steepest intraday gain in two weeks. The stock has lost roughly a fifth since the beginning of the year, valuing the company at about 18 billion euros.
The uncertainty over how fast economies will recover is still an open question. Automotive companies are hoping government incentives will spur sales and help the industry recover in the second half of the year.
“Sales and earnings beat expectations across all divisions while free cash flow was weaker than expected,” Jefferies analyst Sascha Gommel said in a note.
What Bloomberg Intelligence Says:
We anticipate a lack of 2H visibility means companies will remain cautious and Continental refrained from providing a 2020 outlook. The devil is in the detail and full results are due on Aug. 5.
-- Michael Dean, BI automotive analyst
Click here to read the research
Continental embarked on a far-reaching restructuring program last year aimed at restoring squeezed margins. The plan is poised to affect as many as 20,000 positions in coming years that will be cut or shifted.
The Hanover, Germany-based manufacturer widened cutbacks after the Covid-19 pandemic unfolded. It said earlier this month it aims to slash several hundred millions of euros in costs by 2022.
©2020 Bloomberg L.P.