Continental reports strong Q1 profit on cost cuts but tariff uncertainty looms

By Rachel More

BERLIN (Reuters) -German car parts maker Continental reported stronger-than-expected earnings growth on Tuesday in part from cost-cutting efforts, although it warned increasing U.S. trade restrictions from higher tariffs pose economic risks.

"We made a solid start to the year," CEO Nikolai Setzer said in a statement on its first-quarter results.

However, the statement also highlighted the threat of increasing trade hurdles, which were not factored into the group's full-year guidance.

Continental is in the process of splitting off two of its three businesses, seeking a leaner form as a pure-play tyre maker that it hopes will be better positioned in a volatile market rattled by tariffs imposed by the U.S.

The company adapted its 2025 outlook to omit the auto division ahead of a spin-off of the business expected this year, forecasting lower sales but increased profitability.

"Geopolitical tensions and the potential impact of trade restrictions are causing a high degree of uncertainty about global economic development in the current fiscal year," the company said.

RESTRUCTURING SAVINGS

The group comprising the tyres and ContiTech businesses expects sales in a range of around 19.5 billion to 21.0 billion euros ($22 billion to $23.8 billion) and an adjusted profit margin of around 10.5% to 11.5%.

Germany's other major auto parts suppliers, Bosch and ZF, are also undergoing radical restructuring as the sector grapples with a drop in car production and high costs, now compounded by the trade conflict affecting exports to the United States.

Last month, Continental revealed plans to turn its ContiTech rubber and plastics division into an independent entity, targeting a likely sale, while its automotive unit is expected to be spun off this year and subsequently listed on the Frankfurt stock exchange.

The company reported adjusted earnings before interest and taxes (EBIT) of 586 million euros in the first quarter, compared to 201 million euros a year earlier and beating a forecast of 485 million euros, according to a company-provided poll of analysts.

Continental's adjusted EBIT margin in the first three months of 2025 was 6.0% versus a forecast 5.1%.

"The quarterly results reflect our focus on improving our financial position – and show that our efficiency measures are paying off," said Continental CFO Olaf Schick.

($1 = 0.8836 euros)

(Reporting by Rachel More, Editing by Friederike Heine and Christian Schmollinger)