Germany's Continental back in profit, sees subdued start to 2022

By Victoria Waldersee

BERLIN (Reuters) - German automotive parts maker Continental reported on Wednesday a profit for 2021 after two years of losses and forecast higher sales this year while warning about the potential impact of the Ukraine crisis.

It said it could face "lasting consequences" to supply chains, production and demand from what it described as instability in Eastern Europe, after Russia invaded Ukraine.

Continental also said it was working to shift production from a Russian plant where operations were suspended. It does not have any plants in Ukraine.

It still forecast 6%-9% growth in 2022 in global production of passenger cars and light commercial vehicles, expecting this to boost its sales to 38 billion-40 billion euros ($42 billion-$44 billion) from 33.8 billion euros in 2021 and raise its margin to 5.5%-6.5%.

But it said it expected a subdued start to the year and a rise in procurement and logistics costs of 2.3 billion euros.

The chip crisis should ease by the second half of 2022 but it would take until 2023 to rebuild inventories, Chief Executive Nikolai Setzer said.

The company said its outlook did not factor in the possible impact of the Ukraine crisis, but said a prolonged crisis could reduce sales and earnings.

"In the event the geopolitical situation, in particular in Eastern Europe, remains tense or even worsens, it can result in lasting consequences for production, supply chains and demand," Continental said.

Continental, which launched a costly restructuring programme after a downturn in car demand in 2019, reported 2021 net income of 1.5 billion euros, still slightly below Refinitiv's SmartEstimate forecast by 17 analysts of 1.7 billion euros.

The company's shares, which have tumbled since February amid sector-wide fears about the Ukraine crisis and rising inflation, rose 5.3% on Wednesday to 65.13 euros by 1029 GMT.

The restructuring programme, involving cost cuts and spinning off its powertrain division Vitesco, was well underway but no more changes were planned, Setzer said, responding to speculation Continental could spin off more units.

($1 = 0.9102 euros)

(Reporting by Victoria Waldersee, Jan Schwartz, Paul Carrel; Editing by Jason Neely and Edmund Blair)