HANNOVER, Germany — Continental A.G. reported double-digit drops in earnings and sales for the quarter ended March 31 as the COVID-19 pandemic slowed demand, but company management said the impact likely will be even greater in the second quarter.
Overall, Continental reported first-quarter fiscal pre-tax operating income fell 51% to $480 million on 11% lower sales of $10.9 billion, with operations in China playing a central role in the decline.
The company's tire unit reported a 36.6% drop in pre-tax operating income to $166.2 million on 12.2% lower sales of $2.76 billion. Conti cited an 11.7% drop in volume, ramping-down costs and costs associated with underutilization of factories for the earnings decline.
While the first quarter results were startling, Continental management said the second quarter is expected to be the weakest quarter of fiscal 2020 because the full economic impact of the coronavirus pandemic is being felt in Europe and North America — where Conti normally generates three-fourths of its revenue — during the first weeks of the period.
"We will feel the financial impact of the coronavirus pandemic even more strongly in the second quarter," Conti CEO Elmar Degenhart said, noting that both Europe and North America have been hit particularly hard by the effects of the coronavirus pandemic since the end of March, while vehicle production in China is stabilizing again.