Continental Headquarters with new emblem Continental Corporation’s first three quarters of the year proved to be positive with an above-average net income of 1.8 billion Euros, a rise of 14.1% year-on-year. Earnings per share has slingshot from 7.88 to 8.99 Euros and sales is expected to reach 34.5 billion Euros by the end of the year.

Before changes in the scope of consolidation and exchange rate effects, consolidated sales were up 4.7% year-on-year after the first three quarters. On an unadjusted basis, the increase came to 2.7%. Consolidated sales thus amounted to 25.6 billion euros. Special effects as well as other non-recurring expenses to strengthen Powertrain’s profitability and reduce future risks totaling 334 million euros were incurred in this division in the third quarter, mainly in connection with the Hybrid Electric Vehicle (HEV) business unit. As a result, EBIT declined slightly by 2.7% year-on-year to €2.4 billion as at 30 September. This is equivalent to a margin of 9.6% after 10.1% in the same period of the previous year. Adjusted EBIT however climbed by 4.4% year-on-year to almost 3 billion euros in the first three quarters.

The Continental Corporation reduced its net indebtedness by more than 1.6 billion euros year-on-year to 2.4 billion as at September. Compared to last year, net indebtedness decreased by 363 million euros. The gearing ratio thus improved to 36.2% at the end of the third quarter.

As at September, Continental had liquidity reserves of over 6 billion euros in total. Meantime, Continental improved its free cash flow by 527 million to 941 million euros after the first three quarters.

Net interest expense fell by 415 million year-on-year to 216 million euros in the first nine months. This decrease is due in particular to the utilization in the previous year of the option for the early redemption of the four bonds issued in 2010 and their partial refinancing with considerably lower-interest bonds issued in the second half of 2013.

Continental reported income tax expense totaling 371 million euros in its statement of income for the first three quarters. This corresponds to a tax rate of 16.6% after 12.6% in the same period of the previous year. Income tax expense was impacted in particular by the recognition of deferred tax items totaling almost 260 million euros in the U.S.. and Deutschland.

In the Powertrain division, non-recurring expenses of approximately 334 million euros were recognized in the third quarter of 2014. More than three quarters of these expenses are non-cash items. Roughly one quarter of the expenses were not corrected in the adjusted EBIT of the division.

With losses accorded for the quarters, Continental and Korean partners SK Innovation have reduced joint venture projects considerably, which means Continental has an adjustment of 78 million Euros and another 58 million from assets in the joint venture’s HEV unit.

In the first three quarters, Continental’s capital expenditure on property, plant and equipment, and software amounted to 1.3 billion euros. Elsewhere, Continental increased its research and development expenses by 10.4% to approximately 1.6 billion euros in the first nine months.

Sales generated from its two most active divisions, Automotive and Rubber Groups, was 25.7 billion euros in the first nine months. Continental expects a forecast of 180 million euros compared to its targeted 160 million from its Rubber group, thanks to a further decrease in raw material prices.

As at the end of the third quarter, Continental had 189,361 employees, around 11,600 more than at the end of 2013. This increase was attributable to higher volumes, acquisitions and expansion of research and development in the Automotive group and additional production capacity, sales channels and acquisitions in the Rubber group.

Continental pioneers the Connected vehicle

In the field of Connected Vehicles, Continental is making a big leap towards the next evolutionary step for the mobility of tomorrow. Progress on this front is being made, for example, with engine and transmission technology as well as by combining efficient combustion engines with diverse forms of electrification. However, if a person is on the lookout for solution approaches that allow for progress in leaps and bounds beyond the realms of continuous evolution, they will find it with the Internet of Everything (IoE in short). It provides a range of solution approaches for traffic optimization right up to automated driving.

Continental understands that the Smartphone is leading the way. In time to come, the company predicts that the car will be incorporated into the IoE. The Internet will not be coming into the car, but rather the car will become part of the IoE. Half of the infrastructure is already in place. Modern vehicles have their own networked IT structure, and in highly equipped variants this can include close to 100 small computers in the form of control units. Nowadays, cars drive around with over one gigabyte of software on board. But even more importantly, cars are increasingly detecting their surroundings. Intelligent cruise control systems (Adaptive cruise control) and various driver assistance systems, including cameras and radars, are observing what is happening around the car and are interpreting this data to assist drivers at the wheel. Lastly, the connected car combined two main principles; the connectivity itself and modern control systems.

Continental formulates new business unit to develop networked transportation

Continental is also pioneering the development of the transportation of tomorrow. The company is putting together an international team of innovators from the IT and automotive industries who will focus on Intelligent Transportation Systems (ITS).

The new business unit, called “Continental Intelligent Transportation Systems, LLC”, will be headquartered in Silicon Valley, California, USA, and headed by Seval Oz, an expert in vehicle networking and automation. In her previous role she worked on Google’s self-driving car project.