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UPDATE 2-Chip crunch, supply chain woes force Continental AG to cut margin target

* 2021 adj EBIT margin now seen at 5.2%-5.6%

* 2021 consolidated sales seen at 32.5-33.5 bln eur

* Shares up 1% (Recasts, adds share price, context)

BERLIN, Oct 22 (Reuters) - German automotive supplier Continental on Friday slashed its profit margin outlook for 2021 on the back of continuing chip shortages and supply chain problems that continue to weigh on the sector.

The adjusted margin on earnings before interest and tax (EBIT) is now forecast to come in between 5.2% and 5.6%, down from a previous estimate of 6.5% to 7%.

The group said it expected global light vehicle production in the 2021 fiscal year to be within 1% above or below the 2020 level, which is significantly more pessimistic than its previous outlook in August when it assumed production would grow 8-10%.

Continental’s preliminary data, issued ahead of nine-month results scheduled for Nov. 10, showed third-quarter consolidated sales of 8.04 billion euros ($9.35 billion), down from 8.6 billion in the third quarter last year.

The adjusted EBIT margin in the period was 5.2%, a significant drop from last year’s 8.4%.

Shares in the automotive supplier were up 1% after the news, slightly outperforming the German blue-chip DAX index, which was 0.8% higher, with traders saying that the profit warning had been expected and factored in.

Continental, which spun off its powertrain division Vitesco in September, is in the midst of a costly restructuring but said in March it expected to reach net profit for the first time in two years in 2021.

Friday’s statement said it expected full-year consolidated annual sales of between 32.5 billion and 33.5 billion euros, one billion euros below its August estimate and 8 billion euros lower than the goal it set out in March.

In its Automotive Technologies division, the company said it expects to book a margin of -2% to -2.5%.

Rising raw material costs of 550 million euros, as well as higher prices for energy and logistics, were expected to affect predominately the tyres portion of the business. ($1 = 0.8600 euros) (Reporting by Victoria Waldersee; Additional reporting by Christoph Steitz and Hakan Ersen; Editing by Maria Sheahan and Louise Heavens)

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