Continental Raises Outlook After Adjusted Earnings Margin Climbs to 14.9%
Key Facts
Continental raised its full-year outlook after strong performance in its tire business, with adjusted earnings before interest and taxes margin rising to 14.9% in the third quarter from 13.9% a year earlier. Chief Executive Christian Kötz said the company "delivered a very good quarter in the tire business" and raised its outlook in line with the results. He added that Continental was entering the difficult final stretch of the year from a strong position. The outlook revision came as adjusted earnings increased, despite declines in reported sales and quarterly cash flow. The statement did not specify the new full-year outlook figures in the information presented here.
Sales from continuing operations were 3.5 billion euros in the third quarter, compared with 3.9 billion euros in the same period a year earlier, a reported decline of 11.4%. Organic decline, excluding foreign-exchange effects and changes in the scope of consolidation, was 1.5%. The company attributed most of the decrease to the sale of its OESL business in early February 2026. By contrast, adjusted earnings before interest and taxes rose to 514 million euros from 482 million, an annual increase of 6.7%. The results show a divergence between lower sales and improved operating profitability during the period.
Adjusted free cash flow did not match the improvement in earnings, coming in at 31 million euros in the third quarter, down 69.0% from 99 million euros a year earlier. Net income for the period, including continuing and discontinued operations, was 349 million euros, following a loss of 756 million in the third quarter of 2025. The comparison was adversely affected by items related to the Aumovio spin-off and preparations for the sale of OESL. At its pre-results meeting, the average analyst estimate for quarterly adjusted free cash flow was 57.0 million euros, compared with the reported result. Analysts had estimated average sales of 3,458.1 million euros, adjusted earnings before interest and taxes of 479.9 million, and a margin of 13.9%.
Continental attributed the positive performance to increased sales of ultra-high-performance tires measuring 18 inches and above, alongside a slight positive currency effect and a lower impact from tariffs. The company said its commercial measures to address rising raw-material prices supported results, while weak automotive markets weighed on original equipment business. Global car production fell about 1.6% year over year in the third quarter, with production down 5% in North America and 6% in China, while remaining close to its year-earlier level in Europe. In Europe, the Middle East and Africa, tire sales were 1.9 billion euros, up 0.4%, and the adjusted earnings margin rose to 18.7% from 17.7%. The company linked the margin improvement to increased sales of ultra-high-performance tires, particularly winter tires, as well as truck tires.
As part of its group outlook, Continental cut its estimates for ContiTech, classified as discontinued operations, and now expects sales of between 4.2 billion and 4.4 billion euros, compared with the previous range of 4.2 billion to 4.8 billion. It also lowered its forecast for the unit's adjusted earnings margin to a range of 6.5–7.5% from 7.0–8.5% previously. This trajectory differs from the raised outlook for continuing operations. Chief Financial Officer Roland Welzbacher warned that rising raw-material prices were putting further pressure on earnings. Their impact "will be greater in the fourth quarter," he said, while describing large, high-performance tires as a key driver of the business.