Continental revises fiscal outlook amid automotive slowdown

Continental A.G. has adjusted its outlook for fiscal 2019 in the wake of "continued decline" in the global production of passenger cars and light vehicles.

The sales forecast for the year has now been lowered to $49 billion to $50 billion from the $49 billion to $52 billion announced in the first quarter, Continental disclosed in a July 22 statement.

Accordingly, the adjusted pre-tax operating (EBIT) margin for the full year is expected to be around 7% to 7.5%, down from 8% to 9% in the earlier forecast.In the Rubber Group, sales are expected to amount to around $20 billion to $20.5 billion, down from the previous forecast of $20 billion to $21 billion. The division's adjusted EBIT margin is projected to be around 12% to 12.5%, just under the 12% to 13% announced in the first quarter.

Explaining the adjustment, the company said previously it expected automotive production for 2019 to be at the same level as in 2018. However, it said, in view of the latest developments in global production, the company now expects a decline of around 5% for the full year.Furthermore, Conti said there were indications of "unexpected changes in customer demand" as well as potential warranty claims within its automotive group in the second half of the year.

The company release did not clarify what the potential warranty costs related to.

"We are now less optimistic about the second half of the year than we were before," Continental CFO Wolfgang Schaefer said, citing the continuing downward trend in vehicle production in Europe, North America and, particularly, in China.

"Unresolved trade conflicts are also contributing to economic uncertainty," he said. "Therefore, we are adjusting our outlook for the year as a whole."