Continental returns to profit but sees a lackluster start to 2022

BERLIN — Continental reported a profit for 2021 after two years of losses and forecast higher sales this year while warning of the potential impact of the Ukraine crisis.

The supplier said it could face “lasting consequences” on supply chains, production and demand from what it described as instability in Eastern Europe, following the invasion of Ukraine by Russia.

Continental also said it was working to move production from a Russian plant where operations were suspended.

It has no factories in Ukraine.

Continental still forecasts 6-9% growth in 2022 in global production of passenger cars and light commercial vehicles, expecting this to take sales to 38 billion-40 billion euros (42 billion-44 billion dollars) against 33.8 billion euros in 2021 and increases its margin from 5.5% to 6.5%.

But the company said it expected a lackluster start to the year and a rise in supply and logistics costs of 2.3 billion euros.

The chip crisis is expected to ease by the second half of 2022, but it will take until 2023 to rebuild inventory, CEO Nikolai Setzer said.

The company said its outlook did not take into account the possible impact of the Ukraine crisis, but said a prolonged crisis could reduce sales and profits.

“If the geopolitical situation, especially in Eastern Europe, remains tense or even worsens, this can lead to lasting consequences for production, supply chains and demand,” Continental said.

Continental, which launched a costly restructuring program after a drop in automotive demand in 2019, reported 2021 net profit of 1.5 billion euros, still slightly below Refinitiv’s SmartEstimate forecast by 17 analysts from 1, 7 billion euros.

The restructuring program, involving cost reductions and the spin-off of its Vitesco powertrain division, was well advanced but no further changes were planned, Setzer said, responding to speculation Continental might divest more units.

Continental, based in Hannover, Germany, ranks No. 6 on the Automotive News Europe list of the world’s top 100 suppliers, with sales to automakers of $29.7 billion in 2020.

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