HANOVER, Germany — Continental A.G.’s tire business reported double-digit gains in sales and earnings for the quarter ended March 31, based in part on the recovery of the North American and Chinese markets and commercial activities globally.
Pre-tax operating income grew 72.3% to $548 million on 10.4% greater sales of $3.3 billion, Conti reported. As a result, the operating margin jumped six points to 16.6%.
Conti attributed the earnings improvement to the benefits of “significant” volume recovery and a strong price/mix component, which combined to more than offset a negative foreign currency exchange impact and reduced OE business.
At the same time, Conti cautioned that it faces “significant” raw-materials cost headwinds throughout the rest of 2021.
Conti did not provide specific figures for North America, but did note overall replacement market sales of consumer (passenger/light truck/van) and commercial (truck/bus) tires in the quarter fell 11% and 13%, respectively, versus the 2020 period.
Despite the negative first-quarter figures, Conti is projecting global replacement market demand for consumer tires will grow 6% to 8%, with growth in North America lagging that somewhat at 4% to 6%.
In terms of commercial vehicle tires, Conti sees demand in North America and Europe recovering by 4% to 6% over 2020 after both regions experienced double-digit dips in the demand in the first quarter.
Continental is projecting growth in passenger car/light truck production worldwide of 9% to 12%, with North America leading the way at 17% to 20%. Commercial vehicle production, on the other hand, is expected to fall 7% to 12% versus 2020, based largely on a drop of up to 32% in China.
As a corporation, Conti reported 3.5% higher sales of $12.4 billion and an adjusted EBIT margin of 8.1%.
Continental said it continues to experience numerous challenges in its business activities, including the ongoing COVID-19 pandemic, the shortage of semiconductors, increasing costs for raw materials, constraints related to logistics as well as uncertainty and volatility in customer demand.
In addition, the planned increase in research and development expenses in the Autonomous Mobility and Safety business area will have a greater effect in subsequent quarters.
Conti said it stands by its earlier forecast for fiscal 2021 of an adjusted EBIT margin in the 5% to 6% range on sales of $49 billion to $51 billion.
This outlook assumes the company’s Powertrain Technologies business remains fully consolidated for the entire year, Conti said. Depending on developments related to the planned spin-off of Vitesco Technologies in the second half of fiscal 2021, Continental will adjust the outlook.