Continental targets stable earnings in 2025 as cost cuts kick in

BERLIN: German autos supplier Continental is targeting a profit margin for 2025 similar to last year, despite a shrinking market, as it dials down costs and firms up plans to spin off its automotive division, the company said on Tuesday.

Continental, which is in the midst of a deep restructuring involving plant closures in Germany and thousands of job cuts, will announce new short- and mid-term targets as part of its capital markets day later this year, it said.

It has been readying some sectors of the group, such as ContiTech, tires, and automotive, to operate more independently ahead of a planned spinoff of the automotive division, a move it has mulled since last August after several years of low profitability in the segment.

Continental cut its sales guidance twice last year on weak industrial demand in Europe and North America, and forecasts another gloomy year for car sales. It expects global production of passenger cars and light commercial vehicles to stagnate.

The company's cost reduction measures boosted margins in 2024, with adjusted earnings up 6.6% to 2.7 billion euros ($2.83 billion), despite a 4% drop in sales to 39.7 billion euros, in line with consensus estimates.

The company forecast 38-41 billion euros in sales this year with an adjusted earnings margin of 6.5-7.5%, bolstered by ongoing cost cuts.

"Our cost and efficiency measures are proving effective. This is all the more important because we again do not expect any tailwinds from the market this year," CFO Olaf Schick said in a statement.

Automotive companies across Europe have announced plant closures and big layoffs as they struggle with weak demand, high costs, competition from China, and a trade war erupting with the United States, a key export market for the sector. - Reporting by Victoria Waldersee, Andrey Sychev