DGAP-News: Continental AG / Key word(s): Half Year Results/Change in Forecast Strong Tire Business in the Second Quarter: Continental Achieves Respectable Result 2021-08-05 / 08:30 The issuer is solely responsible for the content of this announcement. -----------------------------------------------------------------------------------------------------------------------

- Consolidated sales of ?9.9 billion (Q2 2020: ?6.6 billion, +49.7 percent); organic growth of 55.3 percent - Adjusted EBIT of ?711 million (Q2 2020: -?635 million, up ?1.3 billion) - Adjusted EBIT margin of 7.2 percent (Q2 2020: -9.8 percent) - Net income of ?545 million (Q2 2020: -?741 million, up ?1.3 billion) - Free cash flow before acquisitions, divestments and carve-out effects: ?327 million (Q2 2020: -?1.8 billion, up ?2.2 billion) - Outlook for fiscal 2021 without Vitesco Technologies: consolidated sales of around ?33.5 billion to ?34.5 billion; adjusted EBIT margin of around 6.5 to 7.0 percent - CEO Nikolai Setzer: "After an already subdued start to the year, the ongoing shortage of semiconductors severely slowed automotive production in the second quarter, as expected" - Order volume for display solutions in the meantime at around ?5 billion - Six of the ten highest-volume manufacturers of electric vehicles rely on Continental tires in the original-equipment sector - From 2022, Continental intends to enable the use of recycled PET bottles in tire production

Hanover, August 5, 2021. In view of the ongoing macroeconomic challenges, Continental achieved a respectable result in the second quarter of 2021. While business in the Automotive Technologies group sector was affected by the continuing shortages of electronic components, the Rubber Technologies group sector reported strong figures, thanks in particular to the positive performance of the tire business.

"After an already subdued start to the year, the ongoing shortage of semiconductors severely slowed automotive production in the second quarter, as expected. The chip bottleneck and rising raw material prices are set to weigh on the automotive industry throughout 2021," said Nikolai Setzer, Continental CEO, when presenting the company's quarterly figures on Thursday, adding: "In the Rubber Technologies group sector, we continued to build on the positive performance of the first three months of the fiscal year in the second quarter. Despite the increasing challenges posed by rising raw material prices, we had a strong first half of the year overall. In the Automotive Technologies group sector, meanwhile, the burden of the chip bottleneck is clearly being felt. At the same time, major orders for key technologies such as large-scale vehicle displays illustrate the growing demand for our increasingly digitalized technologies."

Consolidated sales totaled ?9.9 billion in the second quarter of 2021, well above the previous year's level, which was impacted by the economic consequences of the first lockdown due to the coronavirus pandemic (Q2 2020: ?6.6 billion, +49.7 percent). Before changes in the scope of consolidation and exchange-rate effects, sales rose by 55.3 percent. Compared with the weak prior-year quarter, adjusted EBIT increased to ?711 million (Q2 2020: -635 million, up ?1.3 billion). This resulted in an adjusted EBIT margin of 7.2 percent (Q2 2020: -9.8 percent). Net income totaled ?545 million (Q2 2020: -?741 million). In the second quarter, free cash flow before acquisitions, divestments and carve-out effects was ?327 million (Q2 2020: -?1.8 billion).

"After the historically weak prior-year period, we achieved a respectable result in the past quarter despite the persistently challenging market environment. The high level of free cash flow is mainly explained by the lower level of capital expenditure between the months of April and June. For the year as a whole, however, we plan to maintain a capital expenditure ratio of 7 percent," said Wolfgang Schäfer, Continental's CFO. In the second quarter, the capital expenditure ratio amounted to 4.6 percent.

Market developments: significant regional differences There were once again significant regional differences in the development of automotive markets between April and June 2021. According to preliminary figures, global automotive production overall was down 8.9 percent to 18.8 million units, considerably lower than in the first quarter of this year (20.6 million units). Due to the worsening supply shortages of semiconductors, production figures declined significantly by 11.5 percent to 3.2 million units in North America and by 12.0 percent to 4.1 million units in Europe compared to the first quarter of 2021. Only in China were production figures roughly on par with the first quarter of 2021, totaling 5.8 million units (+0.1 percent).

Market outlook and forecast for fiscal 2021

Market developments will continue to be characterized by high volatility in the coming months. The shortages of semiconductors will have a noticeable effect on automotive production. After a production output of 74.6 million passenger cars and light commercial vehicles last year, Continental expects an increase of between 8 and 10 percent for the year as a whole (previously 9 to 12 percent).

Continental is adjusting its outlook for the full year for continuing operations, thus excluding Vitesco Technologies. Continental expects consolidated sales of around ?33.5 billion to ?34.5 billion (previously ?32.5 billion to ?34.5 billion) and an adjusted EBIT margin of around 6.5 to 7.0 percent (previously 6 to 7 percent).

For the continuing operations of Automotive Technologies, Continental expects sales of around ?16.0 billion to ?16.5 billion (previously ?16 billion to ?17 billion) and an adjusted EBIT margin in the range of around 0.5 to 1.0 percent (previously 1 to 2 percent). As has mostly been announced already, this includes higher extra freight costs of around ?200 million as well as additional research and development expenses in the growth field of assisted and automated driving, which now total around ?150 million to ?200 million. The updated forecast for the adjusted EBIT margin results primarily from accounting-related one-off effects from the planned spin-off of Vitesco Technologies totaling around ?80 million. Although this impacts the adjusted margin of Automotive Technologies, it does not have any effect on the net income.

Sales in the Rubber Technologies group sector are now expected to be around ?17.2 billion to ?17.8 billion (previously ?16.5 billion to ?17.5 billion), with an adjusted EBIT margin of around 12.5 to 13.0 percent (previously 11.5 to 12.5 percent). This includes the impact expected from higher raw material costs of around ?500 million (previously ?350 million), which mainly relate to synthetic and natural rubber.

After the spin-off of Vitesco Technologies has been completed, contract manufacturing will also be reported as a new group sector of Continental under the name of Contract Manufacturing. Currently, 21 production sites still manufacture products of Vitesco Technologies as well as products of Continental. This makes it necessary for Continental companies to manufacture products for Vitesco Technologies by way of contract manufacturing and vice versa. This contract manufacturing is not intended to be a permanent situation, and the volumes are to be reduced continuously in the coming years. For the new Contract Manufacturing group sector, sales of around ?250 million and an adjusted EBIT margin of around 2 to 3 percent are expected.

Free cash flow before acquisitions, divestments and carve-out effects is still expected to be around ?1.1 billion to ?1.5 billion for continuing operations.

Key figures for the Continental Group (continuing and discontinued operations)

January 1 to June 30 Second Quarter

? in 2021 2020 ? in % ? million 2021 2020 % Sales 20,166.8 16,532.4 22.0 9,907.9 6,619.7 49.7 EBITDA 2,605.6 1,052.3 147.6 1,202.6 -108.1 1,212.5 in % of sales 12.9 6.4 12.1 -1.6 EBIT 1,338.3 -392.8 440.7 618.4 -829.1 174.6 in % of sales 6.6 -2.4 6.2 -12.5 Research and development expenses (net) 1,703.7 1,721.6 -1.0 884.4 808.6 9.4 in % of sales 8.4 10.4 8.9 12.2 Capital expenditure^1 744.3 923.4 -19.4 452.8 448.4 1.0 in % of sales 3.7 5.6 4.6 6.8 Net income attributable to the shareholders of the parent 992.9 -448.8 321.2 545.3 -741.1 173.6 Basic earnings per share in ? 4.96 -2.24 321.2 2.72 -3.70 173.6 Diluted earnings per share in ? 4.96 -2.24 321.2 2.72 -3.70 173.6 Adjusted sales^2 20,166.7 16,332.8 23.5 9,907.9 6,492.5 52.6 Adjusted operating result (adjusted EBIT)^3 1,544.7 -201.3 867.4 710.9 -634.5 212.0 in % of adjusted sales 7.7 -1.2 7.2 -9.8 Free cash flow before acquisitions, divestments and carve-out effects 996.8 -1,980.2 150.3 327.1 -1,832.6 117.8 Net indebtedness as at June 30 3,213.8 5,923.7 -45.7 Gearing ratio in %

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August 05, 2021 02:30 ET (06:30 GMT)