Continental expects return to net profit despite chip shortage

BERLIN: Continental AG expects to return to net profit this year despite a microchip shortage that is expected to drag on for months, the German automotive parts maker said after reporting a full-year net loss of nearly a billion euros.

The world's second-largest automotive supplier is feeling the impact of the chip shortage, which has forced global automakers to shut assembly lines, especially in the first quarter, CEO Nikolai Setzer said on a call after reporting 2020 results.

Continental reported a 12.7% drop in group sales, citing falling revenue in its Automotive, Rubber and Powertrain divisions.

Its net loss attributable to shareholders narrowed to 962 million euros ($1.14 billion) in 2020, compared with a 1.23 billion euro loss the previous year, thanks to heavy costs cuts and restructuring measures.

Continental shares were down 7% at 1404 GMT, making it the biggest loser on Germany's blue-chip DAX index.

The company said it expects 2021 sales to reach 40.5 billion to 42.5 billion euros, up from to 37.7 billion euros last year. That is expected to help the company to a net profit for the first time in two years, it said, though it could not give a more specific forecast.

The outlook accounted for additional logistics expenses of about 200 million euros because of semiconductor supply bottlenecks, plus development expenses of 200 million to 250 million euros in its autonomous mobility and safety unit.

Finance chief Wolfgang Schaefer said Continental gave clients early warning of the expected chip shortage.

The company said it would adjust its outlook for 2021 depending on the outcome of the spin-off of powertrain unit Vitesco, which is planned for the second half of the year.