Continental Posts Strong Earnings in Tires and High Order Intake in Automotive

Continental ended the second quarter of 2023 with strong earnings
again in the Tires group sector and high order intake in Automotive of around €8.6 billion. The
ContiTech group sector achieved solid results, while earnings in Automotive fell short of
expectations, mainly due to currency effects and continuing costs for special freight. Furthermore,
inflation-related price negotiations scheduled for the second quarter are still ongoing. As a result of
updated market expectations in the tire-replacement business, Continental has adjusted its outlook
for sales in the Tires group sector and for consolidated sales. The outlook for the adjusted EBIT
margins remains unchanged. The technology company therefore expects consolidated earnings to
increase in the second half of the year.
“Despite difficult market conditions, our Tires group sector ended the second quarter with good
earnings once again. ContiTech’s performance remained solid. Earnings in Automotive, however,
fell short of expectations. Here we will need to make up considerable ground in the second half of
the year. By doing so, we will also improve our consolidated margin,” said Continental CEO Nikolai
Setzer in Hanover on Wednesday. “Through our partnership with Aurora, we have generated
significant order intake and taken a major technological step forward in autonomous mobility.
Together, we will bring the first commercially scalable autonomous trucking system to the US
market.”
In the second quarter of 2023, Continental achieved consolidated sales of €10.4 billion
(Q2 2022: €9.4 billion, +10.4 percent). Its adjusted operating result (adjusted EBIT) was
€497 million (Q2 2022: €401 million, +24.1 percent), corresponding to an adjusted EBIT margin of
4.8 percent (Q2 2022: 4.3 percent).
Net income in the second quarter amounted to €209 million (Q2 2022: -€251 million). Adjusted
free cash flow was -€14 million (Q2 2022: -€687 million).
“We stabilized our adjusted free cash flow year-on-year as well as compared with the first quarter
of 2023. As announced, we made initial progress with our inventories, which we will need to reduce
further. The same applies to our receivables, which remain high and are also having a negative
effect on our free cash flow,” said Continental CFO Katja Dürrfeld.
Adjustment of market outlook and forecast for fiscal 2023
For the current fiscal year, Continental expects the production of passenger cars and light
commercial vehicles to increase by 3 to 5 percent year-on-year (previously: 2 to 4 percent). For the
global tire-replacement business, the technology company expects sales volumes to develop by
-2 to 0 percent (previously: 1 to 3 percent).
Continental has adjusted its outlook for the current fiscal year due to the declining European and
North American markets in the tire-replacement business. Continental now expects sales in the
Tires group sector of around €14.0 billion to €15.0 billion (previously: €14.5 billion to €15.5 billion)
and consolidated sales of around €41.5 billion to €44.5 billion (previously: €42 billion to €45 billion).
The outlook for the company’s other sales and margin expectations remains unchanged.
Continental also continues to expect significantly higher costs for materials, wages and salaries as
well as energy and logistics in fiscal 2023. These are expected to impact earnings by around
€1.4 billion (previously: €1.7 billion).
Automotive production higher year-on-year
According to preliminary figures, the global production of passenger cars and light commercial
vehicles amounted to almost 22 million units in the second quarter of 2023, representing an
increase of around 16 percent compared with the relatively weak prior-year quarter
(Q2 2022: 19.0 million units).

Vehicle production in Europe grew to around 4.4 million units in the months of April, May and June
2023 (+15 percent). North America also recorded an increase of around 15 percent to around
4.1 million units. China recorded a substantial year-on-year rise of 20 percent to around 6.6 million
units.
Key figures for the Continental Group
1 The methodology used in the consolidated financial statements for the recognition of uncertain tax positions has been changed. Fo r more information, see
Note 2 (General Information and Accounting Principles) of the notes to the consolidated financial statement s in the 2022 annual report. The comparative
period has been adjusted accordingly.
2 Before changes in the scope of consolidation.
3 Before amortization of intangible assets from purchase price allocation (PPA), changes in the scope of consolidation, and s pecial effects.
4 In the year under review, the presentation of income and expenses in connection with specific warranties, restructuring mea sures, severance payments, as
well as impairment and reversal of impairment losses on intangible assets and propert y, plant and equipment was changed. They are now assigned to the
relevant functional areas. The comparative period has been adjusted accordingly.
5 The assignment of income and expenses from certain business activities within the functional areas has been changed. The comparative period has been
adjusted accordingly.
6 Capital expenditure on property, plant and equipment, and software.
7 Excluding trainees.
January 1 to June 30 Second Quarter
€ millions 2023 2022 Δ in % 2023 2022 Δ in %
Sales 20,732.0 18,722.4 10.7 10,425.9 9,444.1 10.4
EBITDA 1,990.0 1,780.9 11.7 919.8 848.6 8.4
in % of sales 9.6 9.5 8.8 9.0
EBIT 907.8 210.7 331.0 376.7 -164.6
in % of sales 4.4 1.1 3.6 -1.7
Net income attributable to the shareholders of the parent1 590.8 -11.2 208.6 -250.7
Basic earnings per share in €1 2.95 -0.06 1.04 -1.26
Diluted earnings per share in €1 2.95 -0.06 1.04 -1.26
Adjusted sales2 20,668.1 18,699.0 10.5 10,384.9 9,420.7 10.2
Adjusted operating result (adjusted EBIT)3 1,075.5 829.0 29.7 497.2 400.7 24.1
in % of adjusted sales 5.2 4.4 4.8 4.3
Research and development expenses (net)4 , 5 1,547.9 1,454.0 6.5 757.4 708.5 6.9
in % of sales 7.5 7.8 7.3 7.5
Capital expenditure6 940.3 987.5 -4.8 511.3 543.2 -5.9
in % of sales 4.5 5.3 4.9 5.8
Adjusted free cash flow -963.6 -860.6 -14.2 -686.7
Net indebtedness as at June 30 6,075.7 5,433.9 11.8
Gearing ratio in %1 43.7 37.7
Number of employees as at June 30 7 203,746 194,577 4.7

Automotive improves sales and earnings year-on-year
In the Automotive group sector, sales increased by 19.0 percent to €5.1 billion
(Q2 2022: €4.3 billion). With its sales growing organically by 20.1 percent before exchange-rate
effects and changes in the scope of consolidation, and global automotive production rising by
around 16 percent, the group sector again outperformed the market. The adjusted EBIT margin
improved from -2.5 percent in the second quarter of 2022 to -0.6 percent. Compared with the first
three months of 2023, earnings were burdened by substantial negative effects from currency
translation and continuing costs for special freight.
Owing to the expected additional inflation-related costs of around €1 billion in 2023 in Automotive
alone, price agreements still need to be negotiated in partnership with customers. Further
negotiations were successfully concluded in July of this year.
Continental also achieved high order intake in the Automotive group sector of around €8.6 billion in
the second quarter of 2023. The order from the exclusive partnership with Aurora, which the
Autonomous Mobility business area announced in April, made a strong contribution. Together,
Continental and Aurora will bring autonomous trucking systems to the mass market – starting with
the USA in 2027. This business alone will generate order intake of around €4.8 billion for
Continental.
Tires group sector posts strong first half of the year
The Tires group sector had another strong quarter. Despite declining volumes in the tirereplacement
business, it increased its sales to €3.5 billion (Q2 2022: €3.4 billion, +2.3 percent). Its
adjusted EBIT margin was 13.7 percent (Q2 2022: 13.8 percent). This was attributable to the
stable price situation and the group sector’s continued high share of premium tires.
Continental also became the first manufacturer to launch a production tire with a high share of
sustainable materials – the UltraContact NXT. Comprising up to 65 percent renewable and
recycled materials, it combines a high share of sustainable materials with maximum safety and
performance. It also has the highest possible rating (“A”) of the EU tire label in terms of rolling
resistance, wet braking and exterior noise. The UltraContact NXT has been available to tire dealers
in Europe since July 2023.

ContiTech strengthens its industrial business
The ContiTech group sector delivered solid second-quarter results, posting sales of €1.7 billion
(Q2 2022: €1.6 billion, +8.0 percent) and an adjusted EBIT margin of 6.4 percent
(Q2 2022: 4.9 percent). ContiTech thus improved its sales and earnings year-on-year, thanks in
particular to inflation-related price adjustments and positive developments in a number of industrial
areas. The industrial and replacement business developed positively, particularly in the area of
conveyor belts and air spring systems as well as industrial hoses.
In keeping with its strategic realignment, ContiTech also strengthened its industrial business in the
second quarter, with Continental fully acquiring the printing technology business of Trelleborg,
headquartered in Lodi Vecchio, Italy. This strategic step expands the technology company’s range
of surface solutions in the field of printing technology at the same time as boosting its business
with industrial clients. As a result of the acquisition, Continental will gain around 600 employees at
eight locations – in Italy (Lodi Vecchio and Dresano), France, Slovenia, the USA, Brazil, Japan and
China – who mainly produce printing blankets for offset and digital printing.
The strategic realignment of ContiTech launched in May 2023 aims to enhance the group sector’s
impact and efficiency, improve customer and market proximity and further expand its industrial
business.