Continental : Quar­terly State­ment as at March 31, 2020 (PDF)

Quarterly Statement as at March 31, 2021

First Quarter: Continental Achieves Good Result, Confirming its Course for the Future

• Consolidated sales of €10.3 billion (Q1 2020: €9.9 billion, +3.5 percent); organic growth of 8.6 percent
• Adjusted EBIT of €834 million (Q1 2020: €433 million, +92.5 percent)
• Adjusted EBIT margin of 8.1 percent (Q1 2020: 4.4 percent)
• Net income of €448 million (Q1 2020: €292 million)
• Free cash flow before acquisitions and carve-out effects: €670 million (Q1 2020: €87 million)
• Realignment of the Automotive Technologies group sector
• Spin-offof Vitesco Technologies planned for September 2021
• Outlook for fiscal 2021 for the continuing operations: consolidated sales of around €32.5 billion to €34.5 billion; adjusted EBIT margin of around 6 to 7 percent

Continental achieved a good result in the first quarter of 2021 in a persistently challenging market environment. At the same time, the mobility supplier pushed ahead with the implementation of its realigned strategy by making a number of key decisions. With the resolution of the Supervisory Board, the spin-off of Vitesco Technologies, i.e. primarily the Powertrain business area, draws nearer this year as planned. As a result, continuing operations and discontinued operations are reported separately. In the following, however, the Continental Group is considered as a whole. Furthermore, Continental will manage "Autonomous Mobility" and "Safety," which are currently combined in one business area, as independent business areas starting January 1, 2022. This will give us structural clarity while providing more entrepreneurial freedom to define the separate and diverse strategies. We are focusing systematically on growth and pioneering future technologies when it comes to assisted, automated and autonomous driving. And we are focusing on value when it comes to safety.

In view of the adverse effects of the coronavirus pandemic and the resulting tight global supply situation for semiconductors, it was a good start to the current fiscal year. The development of the business in China was particularly positive compared with the same quarter of the previous year, which was severely affected by the coronavirus pandemic. The tire business and the ContiTech business area stood out in particular. Overall, consolidated sales in the first three months of the year amounted to €10.3 billion (Q1 2020: €9.9 billion, +3.5 percent). Before changes in the scope of consolidation and exchange rate effects, sales rose by 8.6 percent. Adjusted EBIT increased year-on-year to €834 million (Q1 2020: €433 million, +92.5 percent), resulting in an adjusted EBIT margin of 8.1 percent (Q1 2020: 4.4 percent). Net income attributable to the shareholders of the parent totaled €448 million (Q1 2020: €292 million). In the first quarter, free cash flow before acquisitions and carve-outeffects was €670 million (Q1 2020: €87 million). The improvement in free cash flow was due in particular to the low level of capital expenditure before financial investments, which accounted for 2.8 percent of sales in the first quarter.

With regard to further business development, the market environment will remain very challenging in the coming months, because the global economy is only gradually getting back on track. This is due not least to the supply shortages of electronic components. Other factors include high market volatility due to the coronavirus pandemic and the increase in the prices of raw materials. In particular, the European car market, which is very important for Continental, is still well below its record level of 2017. Furthermore, the market has not yet returned to its level of 2019.

Strong regional differences in growth

In the first three months, the development of automotive markets varied substantially throughout the world. The market development of passenger cars and light commercial vehicles in China was very strong (5.7 million units, +78.2 percent year-on-year). North America had a relatively weak start to the year compared to 2020 (3.6 million units, -4.5 percent year-on-year). In Europe, production of passenger cars and light commercial vehicles was on par with the low level of the previous year (4.6 million units, -0.3 percent year-on-year; 1.0 million units of which were in Germany, -9.0 percent year-on-year). According to preliminary figures, global production of passenger cars and light commercial vehicles grew by 14.0 percent year-on-year in the first quarter to a total of 20.3 million units (Q1 2020: 17.8 million units). Production in the first quarter was thus substantially lower than in the first quarter of 2019, when 22.9 million vehicles were produced.

Continental Group Quarterly Statement as at March 31, 2021

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Market outlook and forecast for fiscal 2021

For the current fiscal year, Continental continues to expect production of passenger cars and light commercial vehicles to increase by 9 to 12 percent year-on-year.

Continental is adjusting its outlook for the current fiscal year mainly due to the anticipated spin-off of Vitesco Technologies. For continuing operations, the company expects sales of €32.5 billion to €34.5 billion and an adjusted EBIT margin of 6 to 7 percent for 2021. Continental still anticipates negative special effects of around €300 million for the continuing operations in the reporting year. These effects relate to the Transformation 2019-2029 structural program, among other factors. Taking into account the effects of the anticipated spinoff of Vitesco Technologies, Continental expects free cash flow before acquisitions, divestments and carve-out effects of around €1.1 billion to €1.5 billion from continuing operations. The increase is due in particular to the postponement of cash utilizations from restructuring provisions. For fiscal 2021, Continental continues to expect a capital expenditure ratio before financial investments of around 7 percent of sales for continuing operations.

Spin-off of Vitesco Technologies scheduled for September 2021

Despite the challenging macroeconomic environment, Continental is systematically pursuing its strategic realignment. An important step in this direction is the full spin-off including stock market listing of its powertrain business. Subject to the expected approval of the Annual Shareholders' Meeting, Continental will proceed with the planned spin-off in September 2021.

Development of the group sectors

Sales in the Automotive Technologies group sector were down in the first quarter by 2.2 percent to €4.1 billion (Q1 2020: €4.2 billion).

The adjusted EBIT margin rose to 4.5 percent (Q1 2020: 1.9 percent). Organic growth came to 3.4 percent. Strong business in China made a major contribution to this positive development. Furthermore, the volume of orders for fully connected central high-performance computers rose to a total of around €5 billion. For the year as a whole, Continental expects sales of around €16 billion to €17 billion for the continuing operations of Automotive Technologies. An adjusted EBIT margin in the range of around 1 to 2 percent is anticipated. This still includes the higher supply chain costs as well as the additional expenses for research and development announced on March 9, 2021, in the Autonomous Mobility and Safety business area.

In the Rubber Technologies group sector, the Tires business area performed well at the beginning of the year, particularly in China and North America. In the first quarter, the ContiTech business area benefited from the recovery in global vehicle production, especially in China, and from stable industrial business. In the first quarter of 2021 in total, the Rubber Technologies group sector achieved sales of €4.2 billion (Q1 2020: €4.0 billion) and an adjusted EBIT margin of 14.5 percent (Q1 2020: 9.6 percent). Organic sales growth came to

11.7 percent. For its Rubber Technologies group sector, Continental still expects sales of around €16.5 billion to €17.5 billion and an ad- justed EBIT margin of about 11.5 to 12.5 percent for the year as a whole. This includes the impact expected from higher raw material costs.

In the first quarter, the Powertrain Technologies group sector achieved sales of €2.0 billion (Q1 2020: €1.8 billion) and an adjusted EBIT

margin of 3.8 percent (Q1 2020: 0.7 percent). Organic growth came to 12.8 percent. The group sector continued to profit from steady growth in the electrification market. For example, it landed a large order with a sales volume worth hundreds of millions of euros for an innovative high-voltage component - an 800-volt inverter featuring silicon carbide technology.

At the end of the first quarter of 2021, Continental had around 235,000 employees worldwide, representing a decline of more than 1,300 in comparison to the end of 2020. This decline is primarily due to the effects of the programs to increase efficiency and to change the Continental Group's structure, collectively known as Transformation 2019-2029.

Continental Group Quarterly Statement as at March 31, 2021

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Key Figures for the Continental Group

The upcoming spin-off of parts of the Powertrain business area has resulted in the application of IFRS 5, Non-currentAssets Held for Sale and Discontinued Operations. These parts make up most of the discontinued operations.

The following table shows the figures for the Continental Group as a whole, comprising continuing operations and discontinued opera- tions, for the reporting and comparative periods.

Continuing operations and discontinued operations

	January 1 to March 31
€ millions	2021		2020
Sales	10,258.9		9,912.7
EBITDA	1,403.0		1,160.4
in % of sales	13.7		11.7
EBIT	719.9		436.3
in % of sales	7.0		4.4
Net income attributable to the shareholders of the parent	447.6		292.3
Basic earnings per share in €	2.24		1.46
Diluted earnings per share in €	2.24		1.46
Research and development expenses (net)	819.3		913.0
in % of sales	8.0		9.2
Depreciation and amortization1	683.1		724.1
thereof impairment2	29.2		22.6
Capital expenditure3	291.5		475.0
in % of sales	2.8		4.8
Operating assets as at March 31	20,773.6		23,580.9
Number of employees as at March 314	234,999		239,649
Adjusted sales5	10,258.8		9,840.3
Adjusted operating result (adjusted EBIT)6	833.8		433.2
in % of adjusted sales	8.1		4.4
Free cash flow	637.6		10.4
Net indebtedness as at March 31	3,561.7		3,995.6
Gearing ratio in %	25.6		25.8

The figures for the comparative period have been adjusted due to the change in the accounting policy for revenue recognition for subsidiaries in China. This change was announced in the second quarter of 2020.

1 Excluding impairment on financial investments.

2 Impairment also includes necessary reversal of impairment losses.

3 Capital expenditure on property, plant and equipment, and software.

4 Excluding trainees.

5 Before changes in the scope of consolidation.

6 Before amortization of intangible assets from purchase price allocation (PPA), changes in the scope of consolidation, and special effects.

Continental Group Quarterly Statement as at March 31, 2021

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The following table shows the figures for continuing operations for the reporting and comparative periods.

Continuing operations

	January 1 to March 31
€ millions	2021		2020
Sales	8,575.3		8,405.5
EBITDA	1,213.6		1,084.4
in % of sales	14.2		12.9
EBIT	662.6		497.8
in % of sales	7.7		5.9
Research and development expenses (net)	624.4		720.1
in % of sales	7.3		8.6
Depreciation and amortization1	551.0		586.6
thereof impairment2	1.4		6.3
Capital expenditure3	243.0		382.5
in % of sales	2.8		4.6
Number of employees as at March 314	194,947		199,463
Adjusted sales5	8,575.2		8,333.1
Adjusted operating result (adjusted EBIT)6	740.1		464.1
in % of adjusted sales	8.6		5.6
Free cash flow	332.6		98.4

The figures for the comparative period have been adjusted due to the change in the accounting policy for revenue recognition for subsidiaries in China. This change was announced in the second quarter of 2020.

1 Excluding impairment on financial investments.

2 Impairment also includes necessary reversal of impairment losses.

3 Capital expenditure on property, plant and equipment, and software.

4 Excluding trainees.

5 Before changes in the scope of consolidation.

6 Before amortization of intangible assets from purchase price allocation (PPA), changes in the scope of consolidation, and special effects.

Continental Group Quarterly Statement as at March 31, 2021

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Key Figures for the Group Sectors

The upcoming spin-off of parts of the Powertrain business area has resulted in the application of IFRS 5, Non-currentAssets Held for Sale and Discontinued Operations. These parts make up most of the discontinued operations.

The following tables on the key figures for the group sectors in the reporting and comparative periods show primarily continuing operations for Automotive Technologies, only continuing operations for Rubber Technologies and primarily discontinued operations for Power- train Technologies.

	January 1 to March 31
Automotive Technologies in € millions	2021		2020
Sales	4,086.9		4,180.4
EBITDA	400.6		426.9
in % of sales	9.8		10.2
EBIT	139.6		150.7
in % of sales	3.4		3.6
Depreciation and amortization1	261.0		276.2
thereof impairment2	0.0		4.6
Capital expenditure3	142.2		193.6
in % of sales	3.5		4.6
Operating assets as at March 31	8,041.2		9,241.1
Number of employees as at March 314	94,288		97,735
Adjusted sales5	4,086.9		4,111.6
Adjusted operating result (adjusted EBIT)6	182.5		76.3
in % of adjusted sales	4.5		1.9

The figures for the comparative period have been adjusted due to the change in the accounting policy for revenue recognition for subsidiaries in China. This change was announced in the second quarter of 2020.

		January 1 to March 31
Rubber Technologies in € millions	2021		2020
Sales	4,235.4		3,971.7
EBITDA	868.3		651.0
	in % of sales	20.5		16.4
EBIT	583.2		346.4
	in % of sales	13.8		8.7
Depreciation and amortization1	285.1		304.6
	thereof impairment2	1.1		-
Capital expenditure3	90.0		164.2
	in % of sales	2.1		4.1
Operating assets as at March 31	9,756.2		11,036.9
Number of employees as at March 314	100,448		101,620
Adjusted sales5	4,235.3		3,968.1
Adjusted operating result (adjusted EBIT)6	614.8		381.2
	in % of adjusted sales	14.5		9.6
1	Excluding impairment on financial investments.
2	Impairment also includes necessary reversal of impairment losses.
3	Capital expenditure on property, plant and equipment, and software.
4	Excluding trainees.
5	Before changes in the scope of consolidation.
6	Before amortization of intangible assets from purchase price allocation (PPA), changes in the scope of consolidation, and special effects.