Germany’s Continental, Jungheinrich Hit Brakes As Auto Sector Slows
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A slowing auto sector prompted profit warnings from supplier Continental and paint systems producer Duerr late on Monday.Jungheinrich also lowered its outlook citing a downturn in the forklift truck sector. It marked a fourth profit warning from Continental in 16 months, while French rival Faurecia on Tuesday stuck to its guidance. “The main reason is the continued decline in the global production of passenger cars and light vehicles,” Continental said, adding that car production will likely drop by 5% rather than remain flat.
Despite the negative news Continental shares were up 4.6% at 0925 GMT.”The market is telling us that in the short run, the worst has been priced in,” said Evercore ISI analyst Arndt Ellinghorst.
“The magnitude of the cut is worse than we were expecting and bodes poorly for the remainder of earnings season and 2020 outlooks.”
Continental is due to release earnings on August 7.
Duerr, which produces woodworking equipment and paint systems for the auto industry, said lower payment receipts from the auto sector had eaten into its free cashflow in the first half.
The company, which is due to release first-half results on August 7, said its EBIT margin guidance of 7%-8% for 2020 is under review.
Jungheinrich said there had been a sharp drop in customer investment.
“This is due to the gloomier macroeconomic environment and the related current developments in the market for material handling equipment,” said Jungheinrich, which is due to release results on August 8.
Questions & Answers
Q.What specifically caused Continental to issue a profit warning?
What specifically caused Continental to issue a profit warning?
Continental attributed its profit warning primarily to the ongoing decline in the global production of passenger cars and light vehicles. They anticipate car production will drop by 5% instead of remaining flat.
Q.How did the market react to Continental's negative news?
How did the market react to Continental's negative news?
Despite the negative news, Continental's shares were up 4.6% at 0925 GMT. An analyst suggested the market believes the worst has already been factored into the share price in the short term.
Q.What impact did the auto sector slowdown have on Duerr's finances?
What impact did the auto sector slowdown have on Duerr's finances?
Duerr reported that lower payment receipts from the auto sector had negatively affected its free cash flow during the first half of the year. Its EBIT margin guidance for 2020 is now under review.
Q.What was Jungheinrich's reason for lowering its outlook?
What was Jungheinrich's reason for lowering its outlook?
Jungheinrich lowered its outlook due to a sharp drop in customer investment, which it linked to a gloomier macroeconomic environment and current developments in the material handling equipment market.