Continental AG is once again lowering its sales expectations for 2018.

The company says along with less sales, Continental anticipates cost increases and higher warranty claims. Still, it says the company will "grow faster than its relevant markets."

The lower sales guidance is due to a pair of key developments:

  • Original equipment business has fallen short of expectations, especially in Europe and China in the automotive divisions as well as in the ContiTech division.
  • Weak demand in the tire markets in both regions has led to lower sales expectations.

This is the second time the company has lowered its 2018 projections. In April Continental downgraded its financial expectations — then followed that up in August with a more profitable report for the second quarter.

With the revisions, and the expected negative exchange rate effects, Continental expects to have sales of about 45 billion euro.  In comparison to 2017 sales, organic growth of more than 4% is anticipated. The company is expecting an adjusted EBIT margin of more than 9% in 2018. 

For the third quarter, the company expects sales of about 11 billion euro and an adjusted operating result (adjusted EBIT) of more than 700 million euro for the corporation as a whole. The fourth quarter will also be affected by these factors. Continental will report its third-quarter results on Nov. 8.

Here's a look at how the guidance for fiscal 2018 has been adjusted:

  • Consolidated sales: about 45 billion euro (previously: about 46 billion euro). Note: This includes negative exchange-rate effects of about 1 billion euro. Sales guidance not including the negative exchange-rate effects: about 46 billion euro instead of about 47 billion euro as previously forecast.
  • Adjusted EBIT margin: more than 9% (previously: more than 10%).
  • Free cash flow before acquisitions (as well as before the outflow for the funding of the U.S. pension plans): about 1.6 billion euro (previously: about 2 billion euro).
  • Sales in the automotive group: about 27.5 billion euro (previously: about 28 billion euro ). Note: This includes negative exchange-rate effects of about 500 million euro. Sales guidance not including the negative exchange-rate effects: about 28 billion euro instead of about 28.5 billion euroas previously forecast.
  • Adjusted EBIT margin of the automotive group: about 7% (previously: about 8.5%). Warranty claims will reduce the reported and the adjusted EBIT by a total of 150 million euro.
  • Sales in the rubber group: about 17.5 billion euro (previously: about 18 billion euro). Note: This includes negative exchange-rate effects of about 500 million euro. Sales guidance not including the negative exchange-rate effects: about 18 billion euro instead of about 18.5 billion euro as previously forecast.
  • Adjusted EBIT margin of the rubber group: more than 13% (previously: more than 14%).
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