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Germany's Continental aims to triple profitability under new CEO

·2-min read
FILE PHOTO: Continental's pilot location for industry 4.0 applications in Regensburg

FRANKFURT (Reuters) - German auto supplier and tire maker Continental aims to triple profitability under restructuring plans led by its new chief executive, sending its shares 4% higher.

The firm said on Wednesday it was seeking to drive up adjusted earnings before interest and taxes (EBIT) margin to 8% to 11% in the medium term. In November, it said 2020 adjusted EBIT margin was expected to be about 3%.

The Hanover-based company said it would increase its focus on vehicle networking and autonomous driving, while seeking to increase automation and digitalise production.

"While hardware is still important, software will increasingly make the difference in the future," Nicolai Setzer, who took over as chief executive on Dec. 1, said during the firm's Capital Markets Day.

The company, which said it was aiming for organic annual growth in the medium term of about 5% to 8%, said it would press on with restructuring and cleaning up its balance sheet.

It also said it would consider possible sales and acquisitions, as well as partnerships.

Setzer said the planned spin-off of powertrain business Vitesco Technologies would go ahead as scheduled next year.

The company said in September that 30,000 employees would be affected by the restructuring but that did not mean all of them would be laid off. Setzer said some of those people affected would be reassigned rather than made redundant.

The company also warned in November of further restructuring expenses in the fourth quarter.

The auto industry, a crucial sector of Germany's export-driven economy, has been hammered by the coronavirus pandemic at a time when it was already struggling with the shift to electric vehicles from cars powered by diesel and gasoline.

Shares climbed more than 4% in early business before settling back and trading more than 3% higher later in the session.

Continental had announced in October that Elmar Degenhart would step down as chief executive at the end of November due to health issues.

(Reporting by Jan Schwartz in Hamburg and Vera Eckert in Frankfurt; Editing by Thomas Seythal and Edmund Blair)