April 26, 2019 / 7:05 AM / a month ago

Continental delays powertrain IPO to 2020 as profits drop 17%

FRANKFURT (Reuters) - Continental AG will push back the spin-off of its powertrain division until next year, the company said on Friday, when it reported a 17 percent drop in first-quarter operating profit, hit by a downturn in car demand and higher investments.

FILE PHOTO: Flags of German tyre company Continental are pictured before the annual news conference in Hanover, Germany,March 7, 2019. REUTERS/Fabian Bimmer

The Hanover-based automotive supplier said it would update capital markets toward the end of this year about the partial float of the recently formed division, which it has named Vitesco Technologies.

“Depending on market conditions, this can be expected from 2020,” the company said.

The delay marks the second time a high-profile listing has been delayed in Germany this year, after Volkswagen in March postponed listing its truck division until market conditions improve.

Steel maker Thyssenkrupp is also reviewing plans to split its business in two as market conditions deteriorate.

Continental’s earnings before interest and taxes (EBIT) fell to 884 million euros ($984 million) in the first quarter, compared with 1.066 billion euros a year earlier, even as sales remained flat.

Releasing preliminary results before its annual shareholders meeting, Continental said its adjusted EBIT margin fell in the quarter to 8.1 percent from 9.7 percent a year ago.

Continental Chief Executive Elmar Degenhart said “Global car production was down substantially at the beginning of the year, as expected.”

The auto supplier said it expected a market upturn in the second half of the year and confirmed the outlook it gave in January: an adjusted EBIT margin of 8 to 9 percent this year, instead of last year’s more than 9 percent.

Shares in Continental were up 2.1 percent at 0752 GMT, outperforming Germany’s blue-chip DAX index, which little changed.

Reporting by Edward Taylor and Douglas Busvine; editing by Tassilo Hummel, Kirsten Donovan, Larry King

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