By Dominic Chopping
German tire maker Continental expects earnings to increase this year despite continuing challenges from tariffs and currency headwinds.
The company said 2025 was marked by a challenging environment, with negative currency effects in addition to its tires business being weighed by a tariff burden of more than 100 million euros ($116.1 million).
"These challenges will not go away this year," Chief Financial Officer Roland Welzbacher said. "However, thanks to the measures we've taken, our operational strength, our excellent products and our strong brand, we're aiming to increase earnings in 2026 despite the difficult environment."
The company also expects tailwinds from lower raw material prices, a recovery in industrial markets during the second half of the year, and strong demand for certain premium tires.
It said its main tires business delivered sales and profitability last year on a par with the previous year, despite being hit by several hundred million euros of tariff and currency effects. A growing share of sales of ultra-high-performance tires helped margins and business was particularly strong in the fourth quarter, partly due to demand for winter tires in Europe, it said.
However, the performance of its ContiTech unit, that manufactures products like conveyer belts and materials for vehicle interiors, fell short of expectations due to a persistently weak market environment.
The company aims to sell the unit this year after it began a structured sales process earlier this year and it recently said it had seen strong interest from potential buyers.
"We achieved our targets for the Continental Group and for tires in 2025, and reached key milestones in our realignment: the successful spin-off of Aumovio and the sale of OESL," said Chief Executive Christian Kotz.
"This year, with the planned sale of ContiTech and Continental's focus on the tire business, we're entering the final stage of our strategic realignment."
Continental reported 2025 group sales of 19.7 billion euros and an adjusted earnings before interest and taxes margin of 10.3%, in line with preliminary figures released in January.
The net loss in the period totaled 165 million euros, with a FactSet analyst poll expecting a loss of 62 million euros. Earnings were hit by costs arising from the recent spinoff of its Aumovio automotive technology unit and sale of its OESL vehicle components business.
For 2026, Continental expects sales of 17.3 billion to 18.9 billion euros and an adjusted EBIT margin of 11.0% to 12.5%. Adjusted free cash flow is expected to be around 800 million to 1.2 billion euros.
For the overall market as a whole, the company said it continues to expect a volatile environment this year, with sales in the passenger car replacement-tire business seen landing somewhere between a 1% decline and 2% growth. Global production of passenger cars and light commercial vehicles is seen somewhere between flat and 2% lower.
The current outlook doesn't take into account potential effects of the military conflict in the Middle East, it said.
The board is proposing a dividend of 2.70 euros a share, up from 2.50 euros, and expects to distribute a mid-double-digit million euro amount in profit-sharing bonuses to its employees worldwide.
Write to Dominic Chopping at dominic.chopping@wsj.com
(END) Dow Jones Newswires
March 04, 2026 02:32 ET (07:32 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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