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May 07, 2020 03:59 AM

Continental delays autonomous investments after Q1 earnings plunge

Edward Taylor
Reuters
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    FRANKFURT -- Continental said it was postponing investments as its operating profit plunged by 47 percent in the first quarter, hit by coronavirus lockdowns which caused a 25 percent drop in global car production.

    New information technology projects, or plans to expand production capacity at factories have been put on hold, as well as some investments into self-driving technologies, the German supplier said.

    "If you delay autonomous investments for level 4 and level 5 capability by six months, you have not lost the market, since this market will only emerge in 10 years," Chief Financial Officer Wolfgang Schaefer told Reuters.

    Quarterly earnings before interest and taxes dropped to 436.5 million euros ($471.38 million) compared with 823.3 million euros in the year-earlier quarter, Continental said in a statement on Thursday.

    The company's operating margin narrowed to 4.4 percent from 7.5 percent.

    Continental said its second-quarter results will be worse, as lockdown measures hit large markets including the U.S.

    As a result, the supplier will seek to cut investments by 20 percent, following a 26 percent fall in investments in the first quarter.

    Schaefer said Continental does not face liquidity problems and it will not apply for state-backed loans.

    Last month, Continental postponed the planned spin-off of its powertrain unit Vitesco Technologies, citing ongoing economic uncertainty for the delay.

    Vitesco warned in January that it faced margin pressure as it shifts its business beyond combustion engines, which make up 90 percent of revenues, to capture growth from electromobility.

    Continental ranks No. 4 on the Automotive News Europe list of the top 100 global suppliers with worldwide original-equipment automotive parts sales of $37.8 billion in 2018.

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