Conti suspends tire production at Russian plant

HANOVER, Germany — Continental A.G. has suspended production of tires temporarily at its factory in Kaluga, Russia, and halted imports and exports of products to and from Russia company wide, as Russia's war against Ukraine continues.

In a statement provided to European Rubber Journal, Continental said it is able to meet supply obligations "at the moment."

"However, we expect the supply situation for raw materials required for tire production in Europe to gradually deteriorate in light of the sanctions imposed and the further worsening of logistics bottlenecks," the firm stated.

Continental said it had activated corresponding contingency plans that include safety stocks and alternative suppliers.

In a video posted on Conti's website, Chairman Nikolai Setzer said the company is taking efforts to support its staff at the Kaluga plant affected by the suspension.

In the video, Setzer stressed that Conti as a company supports diplomatic efforts and "all combat operations must end as quickly as possible."

The Hanover-based company stressed that at this moment, it is not possible to predict what further economic effects the current crisis will have for the company or its customers.

"We are monitoring the current situation very closely and are constantly reviewing all options available to us," it added.

This applies in particular to "supply chains for raw materials, the transport of supplies and goods, and the effects of the sanctions imposed as a result of the armed conflicts."

According to Tire Business' Global Tire Report, Continental's nine-year-old Kaluga plant has a rated annual capacity of 3 million passenger and light truck tires, with 1,000 employees.

Subscribers may download the Global Tire Report, published Aug. 30, 2021, in our archive.

Separately, Conti cautions in its 2021 financial statements — published March 9 — of "lasting consequences' for production, supply chains and demand, if the geopolitical situation, remains tense or even worsens."

The group said depending on the severity of the disruption, 2022 sales and earnings could be impacted in all group sectors.

Not including these risks, Continental said it expects global production of passenger cars and light commercial vehicles will increase by 6% to 9% in 2022.

In 2021, this figure increased year-on-year by 3% to 77 million vehicles as a result of the semiconductor shortage.

The company also said that it anticipated higher procurement and logistics costs of around $2.5 billion.

The German group expects 2022 consolidated sales to come in at $41 billion to $43.5 billion with an adjusted pre-tax operating (EBIT) margin of 5.5% to 6.5%.

Continental said it expects business to improve gradually following "a subdued start to the year."

In 2021, Conti reported a 37.7% increase in adjusted EBIT to $2.25 billion, on 6% higher sales of $40 billion. The firm did not release a breakdown of segment performance for 2021.

In 2022, Continental expects its Tires business unit to report sales of between around $14.5 billion and $15 billion with an adjusted EBIT margin of 13.5% to 14.5%.