Conti Tire suffers 23% of drop in H1' 2020

Despite suffering a 23% drop in first-half sales revenue, Continental A.G.'s tire group expects a slight recovery in the tire market in the second half of the year.

Conti's tire business reported 41% lower pre-tax operating income for the six months ended June 30 of $786.6 million on 23% lower sales of $4.85 billion, cutting the operating ratio five points to 16.3%. Adjusted EBIT fell 63% to $357 million during the period.

In the quarter ended June 30, sales and operating income plunged 33.4% and 59.6%, respectively, to $2.11 billion and $267.5 million.Conti cited the negative impact the COVID-19 pandemic for the declines in sales volumes for passenger and light truck tires, which it said were "significantly below" the previous year's level in both the OE business and replacement sector.Citing preliminary data, Continental said global sales volumes of replacement tires for passenger car and light vehicles fell by around 15% year-on-year in the first half, in the wake of the COVID-19 pandemic.

Conti linked the slump in the first quarter to weak demand in China, while attributing the second quarter decline to containment measures in Europe and North America.

The division also posted an 8% drop in demand for replacement tires for medium and heavy commercial vehicles.

The German group said it expects demand for replacement tires for cars and light commercial vehicles to "normalize" in the third quarter, although that means volumes in Europe will be 10% to 15% lower than a year ago and 5% to 10% lower in North America.

Third quarter volumes in China are set for a year-on-year increase with Conti expecting a 5% increase in demand versus 2019.

Conti's Rubber Technologies segment, which includes the firm's tires and ContiTech business units, reported a 61% decline in pre-tax operating earnings (EBITDA) to $345 million on 34% lower sales of $3.4 billion.

Overall, Conti anticipates replacement car tire sales volumes for the third quarter to come in 5% to 10% lower than the 2019 level.

In the medium and heavy-duty commercial tires segment, the group expects a decline in demand of 5% to 10% in the third quarter in Europe and North America.