Continental forecasts 2023 profit margin improvement, sending shares higher

Shares of Continental AG increased on Wednesday after the German tyre manufacturer said it anticipated better profitability for its 2023 fiscal year as the automotive industry recovered from supply chain and logistical issues.

The adjusted profit before interest and tax margin for the current 12-month period is expected to be between 5.5% and 6.5%, up from 5% in 2022, according to the German auto components producer. According to consensus projections from Bloomberg, the figure was 6.11%.

According to Continental, its projections are based on both cost-cutting initiatives and a projected increase in worldwide production of light trucks and automobiles.

However, the company flagged that it sees “significantly higher costs” for materials, wages, and salaries as well as energy and logistics weighing heavily on annual income. In total, these expenses are estimated to be around €1.7 billion (€1 = $1.0542).

In the medium term, Continental is aiming to achieve consolidated adjusted pre-tax and interest income of 8% to 11%.

“We know that we need to continue improving if we want to meet our mid-term targets, which is why we are determined to increase our earnings”, said chief financial officer Katja Dürrfeld in a statement.