Forecast process
Each year, Continental forecasts the values of key performance indicators for the Continental Group for the new fiscal year. These include sales and the adjusted EBIT margin for the Continental Group and for the Automotive, Tires, ContiTech and Contract Manufacturing group sectors.
In addition, we provide information on the assessment of important factors influencing earnings before interest and tax (EBIT). These include the expected negative or positive effect of the estimated development of material prices and other cost factors for the current year, the expected development of special effects and the amount of amortization from purchase price allocations. We thus allow the Continental Group’s expected EBIT to be estimated.
Furthermore, we give an assessment of the development of interest income and expenses as well as the tax rate for the Continental Group, which in turn allows the Continental Group’s expected net income to be estimated. We also publish a forecast of the capital expenditures planned for the current year and the adjusted free cash flow. Our forecast is based on our expectations regarding the most important production and sales markets in the new fiscal year.
We publish our forecast as part of our annual press conference and the publication of our annual report. It is continually reviewed over the course of the fiscal year. Possible changes to the forecast are described at the latest in the report for the respective quarter.
Comparison of the past fiscal year against forecast
Our forecast for fiscal 2023, which we published in March 2023, was based on a continued recovery in the global production of passenger cars and light commercial vehicles, particularly in our core markets of Europe and North America.
Our expectations took into account the anticipated impact of ongoing supply shortages for semiconductors on production volumes in 2023.
We also expected significantly higher costs for materials, wages and salaries as well as energy and logistics – amounting to around €1.7 billion – to weigh heavily on our earnings position in fiscal 2023.
Based on the above assumptions as well as on the exchange rates at the beginning of the fiscal year, we anticipated the following key financial figures for fiscal 2023:
- We expected the Continental Group to achieve sales in the range of around €42 billion to €45 billion and an adjusted EBIT margin of around 5.5% to 6.5%.
- We expected our Automotive group sector to achieve sales of around €20.5 billion to €21.5 billion. We expected the adjusted EBIT margin to be around 2% to 3%. This included higher costs for materials, wages and salaries as well as logistics of around €1 billion.
- We expected our Tires group sector to achieve sales of around €14.5 billion to €15.5 billion and an adjusted EBIT margin of around 12% to 13%. This included the expected negative impact from higher costs for wages and salaries as well as energy and logistics of around €400 million.
- We expected our ContiTech group sector to achieve sales of around €6.8 billion to €7.2 billion and an adjusted EBIT margin of around 6% to 7%. This included the expected negative impact from higher costs for materials, wages and salaries as well as energy of around €300 million.
- In the Contract Manufacturing group sector, we anticipated sales of around €400 million to €600 million and an adjusted EBIT margin of around 0%.
- As in the previous year, consolidated amortization from purchase price allocations was again expected to be below €150 million and affect mainly the Automotive and ContiTech group sectors.
- In addition, we expected negative special effects of around €150 million.
- In 2023, we expected the negative financial result to be around €350 million before effects from currency translation, effects from changes in the fair value of derivative instruments, and other valuation effects.
- The tax rate was expected to be around 27%.
- The capital expenditure ratio was expected to be around 6% of sales in fiscal 2023.
- We were planning on adjusted free cash flow of approximately €0.8 billion to €1.2 billion.
The outlook remained unchanged in the quarterly statement for the first quarter of 2023.
In the half-year financial report, we adjusted our outlook for fiscal 2023 due to the following factors:
- We expected the global production of passenger cars and light commercials to increase by 3% to 5% year-on-year in 2023.
- For the tire-replacement business, we expected sales volumes to develop by -2% to 0%.
- Higher costs for materials, wages and salaries as well as energy and logistics – amounting to around €1.4 billion – were expected to weigh on our earnings position in fiscal 2023.
Assuming that, as the year progressed, exchange rates would not materially differ, the aforementioned factors meant that the following changes were made to the 2023 outlook:
- Consolidated sales were expected to be in the range of around €41.5 billion to €44.5 billion, and the adjusted EBIT margin was expected to be around 5.5% to 6.5%.
- For the Tires group sector, sales were expected to be around €14.0 billion to €15.0 billion, with an adjusted EBIT margin of around 12% to 13%. The adjusted EBIT margin range assumed higher costs year-on-year, primarily for wages and salaries, of around €200 million.
- We expected the ContiTech group sector to achieve sales of around €6.8 billion to €7.2 billion and an adjusted EBIT margin of around 6% to 7%. The adjusted EBIT margin range assumed a year-on-year increase in costs for materials, wages and salaries as well as energy of around €200 million.
- In addition, we expected negative special effects of around €350 million.
As before, we again pointed out the anticipated impact of ongoing supply shortages in some areas, particularly for semiconductors, on production volumes in 2023.
All other parts of the outlook remained unchanged.
In the quarterly statement for the third quarter of 2023, we adjusted the following estimates:
- For 2023, we expected production of passenger cars and light commercial vehicles to increase by 5% to 7% year-on-year.
- The industrial business showed signs of developing by -2% to 0% in the eurozone; in the USA we anticipated a figure of between -1% and +1% for the year as a whole; and in China we expected a recovery in demand of 4% to 6%.
With respect to the key financial figures, we made the following changes:
- Consolidated sales were expected to be in the range of around €41.0 billion to €43.0 billion, and the adjusted EBIT margin was expected to be around 5.5% to 6.5%.
- We expected our Automotive group sector to achieve sales of around €20.0 billion to €21.0 billion. We expected the adjusted EBIT margin to be around 2% to 3%. This included higher costs for materials, wages and salaries as well as logistics of around €1 billion.
- For the Tires group sector, sales were expected to be around €14.0 billion to €15.0 billion, with an adjusted EBIT margin of around 12.5% to 13.5%. The adjusted EBIT margin range assumed higher costs year-on-year, primarily for wages and salaries, of around €200 million.
All other parts of the outlook remained unchanged.
Owing to our operating performance in the fourth quarter, we achieved the adjusted expectations for fiscal 2023 as follows:
- The Continental Group generated sales of €41.4 billion and an adjusted EBIT margin of 6.1%.
- The Automotive group sector generated sales of €20.3 billion and an adjusted EBIT margin of 1.9% in 2023.
- The Tires group sector generated sales of €14.0 billion and an adjusted EBIT margin of 13.5%.
- The ContiTech group sector generated sales of €6.8 billion and an adjusted EBIT margin of 6.7%.
- The Contract Manufacturing group sector generated sales of €0.5 billion and an adjusted EBIT margin of 1.6%.
- Total consolidated expense from special effects amounted to €551.2 million in 2023.
- Amortization from purchase price allocations was €118.2 million.
- In the year under review, the negative financial result amounted to €316.0 million before effects from currency translation and before effects from changes in the fair value of derivative instruments, and other valuation effects.
- Income tax expense for fiscal 2023 amounted to tax expense of €424.1 million. The tax rate was 26.2%.
- The capital expenditure ratio was 5.9%.
- Adjusted free cash flow was €1,292.3 million in 2023 and therefore slightly above our forecast range of €0.8 billion to €1.2 billion in the quarterly statement for the third quarter of 2023.
| Comparison of forecasts for the group sectors of Continental for fiscal 2023 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Automotive | Tires | ContiTech | Contract Manufacturing | |||||
| Sales |
Adjusted EBIT margin (%) |
Sales |
Adjusted EBIT margin (%) |
Sales |
Adjusted EBIT margin (%) |
Sales |
Adjusted EBIT margin (%) |
|
| Annual press conference on March 8, 2023 | ~ 20.5 – 21.5 | ~ 2 – 3 | ~ 14.5 – 15.5 | ~ 12 – 13 | ~ 6.8 – 7.2 | ~ 6 – 7 | ~ 0.4 – 0.6 | ~ 0 |
| Half-year financial report as at August 9, 2023 | ~ 20.5 – 21.5 | ~ 2 – 3 | ~ 14.0 – 15.0 | ~ 12 – 13 | ~ 6.8 – 7.2 | ~ 6 – 7 | ~ 0.4 – 0.6 | ~ 0 |
| Quarterly statement as at November 8, 2023 | ~ 20.0 – 21.0 | ~ 2 – 3 | ~ 14.5 – 15.5 | ~ 12.5 – 13.5 | ~ 6.8 – 7.2 | ~ 6 – 7 | ~ 0.4 – 0.6 | ~ 0 |
| 2023 annual report | 20.3 | 1.9 | 14.0 | 13.5 | 6.8 | 6.7 | 0.5 | 1.6 |
| Comparison of key forecast elements for the Continental Group for fiscal 2023 | |||||
|---|---|---|---|---|---|
| Continental Group | |||||
| Sales |
Adjusted EBIT margin (%) |
Special effects |
Investments (in % of sales) | Adjusted free cash flow |
|
| Annual press conference on March 8, 2023 | ~ 42 – 45 | ~ 5.5 – 6.5 | ~ –0.15 | ~ 6 | ~ 0.8 – 1.2 |
| Half-year financial report as at August 9, 2023 | ~ 41.5 – 44.5 | ~ 5.5 – 6.5 | ~ –0.35 | ~ 6 | ~ 0.8 – 1.2 |
| Quarterly statement as at November 8, 2023 | ~ 41.0 – 43.0 | ~ 5.5 – 6.5 | ~ –0.35 | ~ 6 | ~ 0.8 – 1.2 |
| 2023 annual report | 41.4 | 6.1 | -0.6 | 5.9 | 1.3 |
All figures take into account the exceptions and definitions specified in each case in the comparison against forecast.
Order situation
The order situation in our Automotive group sector continues to be characterized by a volatile market environment and the transformation of the automotive industry. In total, orders amounting to around €27 billion were acquired in fiscal 2023 (PY: €23 billion). This figure includes expected sales over the entire duration of the delivery, known as lifetime sales. These are based primarily on assumptions regarding production volumes of the respective vehicle or engine platforms, the expected and agreed cost adjustments, and the development of key raw material prices.
The replacement-tire business accounts for a large portion of the Tires group sector’s sales, which is why it is not possible to calculate a reliable figure for order volumes.
The same applies to the ContiTech group sector, which has business areas operating in various markets and industrial sectors, each in turn with their own relevant factors. Consolidating the order figures from the various business areas of the ContiTech group sector would thus be meaningful only to a limited extent.
Outlook for fiscal 2024
As mentioned on page 108 of the report on expected developments, we expect the global production of passenger cars and light commercial vehicles in 2024 to be roughly on a par with the previous year, with a negative development expected in our core market of Europe.
This outlook takes into account the current tense geopolitical situation and its expected impact on production volumes in 2024.
Higher costs for wages and salaries – amounting to around €0.5 billion – are expected to weigh heavily on our earnings position in fiscal 2024, with around half of these costs attributable to the Automotive group sector.
Based on the above assumptions as well as on the exchange rates at the beginning of the fiscal year, we expect the following key financial figures for fiscal 2024:
- We expect the Continental Group to achieve sales in the range of around €41.0 billion to €44.0 billion and an adjusted EBIT margin of around 6.0% to 7.0%.
- We expect our Automotive group sector to achieve sales of around €20.0 billion to €22.0 billion. We expect the adjusted EBIT margin to be around 3.0% to 4.0%.
- We expect our Tires group sector to achieve sales of around €14.0 billion to €15.0 billion and an adjusted EBIT margin of around 13.0% to 14.0%.
- We expect our ContiTech group sector to achieve sales of around €6.6 billion to €7.0 billion and an adjusted EBIT margin of around 6.5% to 7.5%.
- In our Contract Manufacturing group sector, we anticipate sales of around €200 million to €300 million and an adjusted EBIT margin of around 0%.
- Consolidated amortization from purchase price allocations is expected to be around €100 million and affect mainly the Automotive and ContiTech group sectors.
- In addition, we expect negative special effects of around €450 million.
- In 2024, we expect the negative financial result to be around €350 million before effects from currency translation, effects from changes in the fair value of derivative instruments, and other valuation effects.
- The tax rate is expected to be around 27%.
- The capital expenditure ratio is expected to be around 6.0% to 7.0% of sales in fiscal 2024.
- In 2024, we are planning on adjusted free cash flow of approximately €0.7 billion to €1.1 billion.
