MUNICH -- Continental's disappointing sales in China and Europe forced the car-parts maker to cut its revenue forecast. In addition, the company said spending on new technology is weighing on profitability. Shares plunged the most since 2009.
The world’s second-biggest automotive supplier expects revenue of 46 billion euros ($53 billion) for the year, excluding currency effects, 1 billion euros lower than a previous target, the Hanover, Germany-based Continental said Wednesday in a statement. It also reduced its forecast for operating return on sales to more than 9 percent, down from a 10 percent target.
Continental’s second guidance cut this year highlights the pressures on automotive companies whose traditional business model is in flux. The manufacturer, which last month announced sweeping changes to keep pace with the industry’s transformation to electric and self-driving cars, said the high costs of developing new technology for its customers were weighing on its business. This switch from combustion engines to plug-in hybrid and electric cars also boosted spending demands, the company said.
Continental fell 14 percent to 159.95 euros at 3:50 p.m. in Frankfurt, the most intraday since February 2009.
Issuing a profit warning so soon after an earlier forecast cut in April was a shock, Tim Schuldt, an analyst at Equinet, said by phone. The issues stem from both market-wide and home-grown conditions, he said.
Continental will cut costs further to adapt to the lowered guidance, CFO Wolfgang Schaefer said on a call with analysts. Most of these measure will occur in the third quarter, helping Continental regain its footing by the last three months of the year, when the operating margin should return to close to 10 percent, he said.
Asked why Continental reviewed its guidance just a few weeks after releasing earnings, Schaefer said the company had expected that business would pick up after weakness early in the quarter, “but it didn’t.”