HANOVER, Germany — Continental A.G.'s tire business suffered a 17% drop in pre-tax operating earnings for the quarter ended March 31 on 5.1% higher sales revenue.
Conti attributed the earnings drop in part on higher labor, logistics and energy costs as well as a difference in inventory valuations between the 2023 and 2022 periods.
The business generated higher revenue of $3.75 billion despite 8.6% lower unit volume sales. As a result, the business unit's operating ratio fell three and a half points to 13.5%.
Conti attributed the revenue increase to an improved price/mix component, with mix playing a significant role.
Continental Tire the Americas L.L.C. announced three price increases in the U.S. last year, on select Continental and General passenger and light truck tires, on Oct. 1, June 1 and April 1. The firm did not specify the increases, saying they vary across specific products by brand.
After a largely lackluster first quarter — industry replacement market tire volumes down both for consumer (off 4%) and commercial tires — Conti is projecting more optimism for the remainder of 2023, in the consumer sector at least, where it expects the market to be up 1% to 3% over the corresponding 2022 period.
Business in commercial tires should improve as well throughout the rest of 2023, Conti said, but not enough to offset the declines of the first quarter.
Overall, the company confirmed its earlier forecasts for fiscal 2023: tire business unit revenue growth of up to 10.7% with an EBIT margin of 12% to 13%.
From a corporate perspective, Continental A.G. reported 41.5% higher EBIT on 11.1% higher revenue and net income of nearly $410 million.
As such, the tire business represents one-third of Continental A.G.'s overall sales, down slightly from the fiscal 2022 first quarter.
