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BERLIN (Reuters) -Auto parts supplier Continental beat expectations on Thursday with a 47% jump in third-quarter operating profit as price hikes and a strong recovery in auto production offset rising energy and logistics costs.
The company maintained its outlook for the year and said its supplier network in its home market of Germany was stable, but warned the overall business environment was still highly volatile.
Continental is on track to reduce its own natural gas consumption in Germany by 20% by the end of the year as promised, Chief Financial Officer Katja Duerrfeld said, amid pressure on German companies to lower their intake in light of a cut in supplies from Russia.
The company’s shares were up more than 3% after it reported adjusted earnings before interest and tax of 605 million euros ($605 million) for the quarter, topping the mean forecast of 519 million in a company poll of 10 analysts.
Global automotive production is recovering from drastically reduced output, both in the second quarter of this year after Russia’s invasion of Ukraine and last year’s third quarter, when supply chain snags hit the industry hard.
Production rose 11.1% compared to last quarter and 27.5% compared to the third quarter last year, Continental said, with the highest regional year-on-year growth in China.
Duerrfeld said the company saw no reason to pull back from the “extremely important” Chinese market, amid an ongoing debate in Germany about how to manage the economic relationship with an authoritarian government.
The Inflation Reduction Act had not spurred new plans to invest in the United States, but further relocation of production out of Germany beyond what was already outlined in the company’s ongoing 2019 restructuring programme could not be ruled out, she said.
Continental, which returned to profit in 2021 after two years of losses, was back in the red in the second quarter of this year, but said at the time it expected improvements in the second half.
Measures taken to mitigate rising costs since then include passing on higher prices to customers and spreading raw materials purchasing across multiple suppliers.
Still, higher interest rates and valuation effects led to a net loss of 211 million euros in the third quarter.
“In light of the challenging environment, we did well to achieve our third-quarter forecast, but our financial results are not in line with our medium-term targets. However, we are on the right track and our order intake remains high,” Chief Executive Nikolai Setzer said.
($1 = 0.9996 euros)
