Continental posts Q2 profit beat, but warns of worsening raw material costs
Continental’s Second-Quarter Performance and Outlook
By Emanuele Berro and Simon Ferdinand Eibach
Aug 4 (Reuters) - German car parts supplier Continental beat second-quarter profit expectations on Tuesday, as premium tyre sales and lower raw-material costs more than offset falling volumes and weak global vehicle production.
Profit Drivers and Market Reaction
However, it kept the annual guidance for its core tyres business unchanged, warning that the raw material tailwinds seen in the first half of 2026, and especially in the first quarter, would fully reverse in the second half.
Continental shares fell 2% by 0858 GMT.
Raw Material Costs and Company Warnings
"The most important difference between the first half and the second half is we benefited substantially from raw material tailwinds in the first half," Chief Financial Officer Roland Welzbacher told Reuters.
Continental, which relies on oil‑derived raw materials to make synthetic rubber for its tyre production, had previously warned that significantly higher oil prices over a longer period would drive up costs.
Financial Impact and Profitability Targets
The company expects to take a triple-digit-million-euro hit in the latter half of 2026, having booked a similarly sized positive effect in the first half, Welzbacher said, adding this should not prevent it from reaching the upper half of its profitability target for tyres.
Strategic Realignment and Future Outlook
FOCUS ON PROFITABILITY
Divestments and Core Business Focus
Continental is in the final stretch of a major strategic realignment to shed its non-tyre assets and focus on its most profitable business, having agreed to sell its rubber and plastic division ContiTech in July.
Tyre Unit Performance
While tyre volumes declined 2.3% in the second quarter, the unit's adjusted operating margin rose to 15.3% and exceeded the upper end of its full-year target range of 13% to 14.5%.
Quarterly Earnings and Guidance
Continental's quarterly adjusted earnings before interest and taxes were €570 million ($656 million), which beat a company-provided analyst consensus.
Excluding contributions from ContiTech, the Hanover-based company now expects annual sales of around €13.2 billion to €14.2 billion and an adjusted operating margin of around 12% to 13.5% at group level.
Additional Information
($1 = 0.8690 euros)
(Reporting by Emanuele Berro and Simon Ferdinand Eibach in Gdansk, editing by Milla Nissi-Prussak)
