Auto supplier Continental AG reported a slight drop in profitability at its rubber group, which covers plastic and rubber parts along with tires, for the third quarter, while also issuing a downbeat forecast for future growth prospects in the automotive industry.

Hanover, Germany-based Continental's financial update was accompanied by news that its executive board has decided to fully spin off its powertrain business Vitesco Technologies with subsequent listing. Due in part to market uncertainty, the company no longer will pursue a potential partial IPO of its powertrain operations, which it originally had considered.

Third quarter sales in the rubber unit, comprising Continental's tires and ContiTech businesses, were about $5.1 billion compared to $4.7 billion in the same period a year ago. Adjusted earnings before interest and taxes margin for the group was about 12.3 percent, compared to the prior-year 12.5 percent, the company's preliminary figures issued Oct. 22 show.

For the Continental group as a whole, consolidated sales in the third quarter came in at about $12.4 billion and the adjus

"Considering the unresolved trade disputes, the unclear situation regarding Brexit, and declining markets, we did reasonably well in the third quarter from an operational standpoint," Continental's Chief Financial Officer Wolfgang Schaefer, Continental's chief fiscal officer, said in a statement.

▲Schaefer

But, while Schaefer confirmed Continental's annual outlook for sales and earnings, he issued a stark assessment of the group's main market going forward.

"We do not anticipate that global production of passenger cars and light commercial vehicles will experience any material improvement in the next five years, so we have revised our assumptions for the medium-term market development accordingly," he said.

The assumptions made and adapted as part of the annual planning process led to non-cash impairments of goodwill and other intangible assets totaling about $2.8 billion.

The impairments, which Continental "recognized" in the third quarter, are mainly linked to the revision of market expectations, Schaefer pointed out.

SOURCE : https://www.plasticsnews.com/news/continental-projects-five-year-downturn-global-auto-market