Continental Shares Rise as Tire Maker Bets on Chinese Automakers to Drive Business Growth

Continental's stock climbed in early European trading as the German tire and components maker raised its full-year outlook, pinning hopes on partnerships with Chinese automakers entering Europe to stabilize its European business growth.

The company upgraded its adjusted EBIT margin and free cash flow guidance for continuing operations, driven by a strong third-quarter operating performance, particularly in the European market.

The global tire industry is undergoing widespread structural transformation, shaped by the restructuring of global supply chains and shifting product demand brought about by vehicle electrification.

Continental said on Wednesday that its European business is well positioned to capture future opportunities from supplying Chinese automakers that are expanding into Europe.

In early European trading, the company's shares rose about 6%.

Continental now expects its adjusted EBIT margin for the year to be approximately 13.4% to 14.0%, up from its previous guidance of 12% to 13.5%.

Free cash flow guidance was raised to 1.0 to 1.3 billion euros (equivalent to 1.12 to 1.45 billion US dollars), compared with the prior expectation of 700 million to 1.1 billion euros.

The revenue forecast range was narrowed to 13.5 to 13.9 billion euros, from the previous range of 13.2 to 14.2 billion euros.

In the third quarter, consolidated revenue fell 11% year-on-year to 3.5 billion euros.

However, the company posted a net profit of 349 million euros, swinging back to profitability from a net loss of 756 million euros in the same period last year, which was weighed down by one-off costs related to a business spin-off and the sale of the OESL business.

According to market consensus compiled by the company, adjusted EBIT for the quarter was 514 million euros, above analysts' expectations of 478.4 million euros.

Bernstein analyst Harry Martin noted in a research report that the EBIT beat was partly due to tens of millions of euros in US tariff refunds and higher net gains from inventory accounting.

He also wrote, however, that the overall financial results remained strong.