Continental scraps dividend but expects ‘significant recovery’ in the car market

Continental expects a “significant recovery” in the global car market this year despite the pandemic and the chips shortage, as the German car parts maker scrapped its dividend following a year of deep losses.

The group, which makes components found in four out of five cars globally, posted a €718m pre-tax loss for 2020, on sales that fell 15 per cent to €37.7bn.

It also scrapped its dividend for 2020; last year Continental was criticised for paying €600m in dividends despite having taken German government money to put thousands of workers on furlough.

But chief financial officer Wolfgang Schäfer said the final quarter of the year, when the company made a profit after six months of deep losses, “has shown that we have passed the low point”.

“The economic environment is gaining momentum,” he added.

He said this year would be “challenging” for carmakers because of the global semiconductor shortage, but that a “substantial increase” in global car production is expected.

A shortage of chips has caused the world’s largest carmakers to halt or reduce production, with the industry not expecting the situation to recover fully until the second half of the year.

“We nevertheless anticipate that the market will recover significantly compared to 2020,” Schäfer said.

However the group has previously said it doesn’t expect the global car market to recover to its 2017 peak of 95m vehicles until 2025.

Continental expects its own sales to rise to €40.5-€42.5bn this year, and is targeting a profit margin of 5-6 per cent, with a long term aim of hitting 11 per cent after the industry’s transition to electric cars.

The company is shedding 30,000 jobs to save billions, though has ruled out further cuts despite coming under pressure as the shift towards electric vehicles shakes up large parts of the traditional automotive supply chain.

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