TRANS 2019 ANNUAL REPORT FORMATION 2019 HIGHLIGHTS > KEY FIGURES > OVERVIEW OF THE CORPORATION > 2019 Highlights › Sales at €44.5 billion › Net indebtedness at €4.1 billion › Equity ratio at 37.3% Key Figures for the Continental Corporation IFRS 16, Leases, was adopted on and has been applied since January 1, 2019. It is applied using the modified retrospective approach, under which the previous year’s figures are not adjusted. As a result, some of the following figures are not comparable with the prior-year period. € millions 2019 2018 ∆ in % Sales 44,478.4 44,404.4 0.2 EBITDA 4,977.2 6,235.7 –20.2 in % of sales 11.2 14.0 EBIT –268.3 4,027.7 –106.7 in % of sales –0.6 9.1 Net income attributable to the shareholders of the parent –1,225.0 2,897.3 –142.3 Basic earnings per share in € –6.13 14.49 –142.3 Diluted earnings per share in € –6.13 14.49 –142.3 Adjusted sales1 43,867.7 44,374.2 –1.1 Adjusted operating result (adjusted EBIT)2 3,233.9 4,117.0 –21.5 in % of adjusted sales 7.4 9.3 Free cash flow 761.7 1,351.0 –43.6 Net indebtedness 4,071.7 1,661.3 145.1 Gearing ratio in % 25.6 9.1 Total equity 15,875.7 18,333.3 –13.4 Equity ratio in % 37.3 45.3 Number of employees as at December 313 241,458 243,226 –0.7 Dividend per share in € 4.004 4.75 Share price at year end5 in € 115.26 120.75 –4.5 Share price at year high5 in € 157.40 257.40 Share price at year low5 in € 103.62 119.10 1 Before changes in the scope of consolidation. 2 Before amortization of intangible assets from purchase price allocation (PPA), changes in the scope of consolidation, and special effects. 3 Excluding trainees. 4 Subject to the approval of the Annual Shareholders’ Meeting on April 30, 2020. 5 Price quotations of the Continental share in the Xetra system of Deutsche Börse AG. Overview of the Corporation and 2019 Key Figures Structure of the corporation in 20191 Continental Corporation Sales: €44.5 billion; Employees: 241,458 Automotive Group Rubber Group Sales: €26.5 billion; Employees: 138,295 Sales: €18.0 billion; Employees: 102,685 Chassis & Safety Powertrain Interior Tires ContiTech Sales: €9.4 billion Sales: €7.8 billion Sales: €9.6 billion Sales: €11.7 billion Sales: €6.4 billion Employees: 48,434 Employees: 41,744 Employees: 48,117 Employees: 56,884 Employees: 45,801 Advanced Driver Engine & Drivetrain Body & Security Passenger and Light Air Spring Systems Assistance Systems Systems Commercial Vehicles & Truck Tire Original Surface Solutions2 Equipment Hydraulic Brake Systems Powertrain Components Aftermarket Conveyor Belt Group Passenger and Light Passive Safety & Hybrid & Electric Vehicles Infotainment & Industrial Fluid Solutions Sensorics Connectivity Truck Tire Replacement Business, EMEA Mobile Fluid Systems Vehicle Dynamics Instrumentation & Driver HMI Passenger and Light Power Transmission Truck Tire Replacement Group Business, The Americas Vibration Control Passenger and Light Truck Tire Replacement Business, APAC Commercial Vehicle Tires Two-Wheel Tires 1 The corporate structure as of January 1, 2020, can be found in the Structure of the Corporation section. 2 Until June 2019: Benecke-Hornschuch Surface Group. IFRS 16, Leases, was adopted on and has been applied since January 1, 2019. It is applied using the modified retrospective approach, under which the previous year’s figures are not adjusted. As a result, some of the following figures are not comparable with the prior-year period. Key figures for the core business areas Automotive Group Rubber Group € millions 2019 2018 in % 2019 2018 in % Sales 26,523.3 26,855.8 –1.2 18,012.9 17,603.1 2.3 EBITDA 1,920.2 3,177.1 –39.6 3,168.2 3,196.6 –0.9 in % of sales 7.2 11.8 17.6 18.2 EBIT –2,107.7 1,890.4 –211.5 1,957.5 2,278.3 –14.1 in % of sales –7.9 7.0 10.9 12.9 Adjusted sales1 26,376.3 26,833.4 –1.7 17,549.2 17,595.1 –0.3 Adjusted operating result (adjusted EBIT)2 1,166.3 1,868.6 –37.6 2,175.2 2,389.4 –9.0 in % of adjusted sales 4.4 7.0 12.4 13.6 1 Before changes in the scope of consolidation. 2 Before amortization of intangible assets from purchase price allocation (PPA), changes in the scope of consolidation, and special effects. “ We are undergoing a profound transformation. It affects everything that makes up our business – from products and processes to business models and structures. While it poses major challenges, it above all presents major opportunities.” Dr. Elmar Degenhart Chairman of the Executive Board Find out more in our online magazine: mag.continental.com Contents C3 35 To Our Shareholders Management Report Key Figures for the Continental Corporation C3 Glossary of Financial Terms 36 Overview of the Corporation and Key Figures C4 Corporate Profile 38 Chairman’s Letter 4 Structure of the Corporation 38 Corporate Strategy 41 Members of the Executive Board 6 Corporate Management 43 Research and Development 46 Continental Shares and Bonds 8 Sustainability and Combined Corporate Non-Financial Statement 48 Corporate Governance 12 Information on Reporting 48 Our Approach to Sustainability Management 48 Report of the Supervisory Board 12 Development of Strategic Sustainability Corporate Governance Declaration Pursuant Focus Areas 49 to Section 289f of the German Commercial Development of Other Sustainability Topics 50 Code (HGB) 16 Reasonable Assurance Report Compliance 22 of the Independent Auditor 53 Remuneration Report 23 Economic Report 55 General Conditions 55 Macroeconomic Development 55 Development of Key Customer Sectors 55 Development of Raw Materials Markets 57 Earnings, Financial and Net Assets Position 59 Earnings Position 60 Financial Position 66 Net Assets Position 68 Automotive Group 72 Development of the Chassis & Safety Division 73 Development of the Powertrain Division 75 Development of the Interior Division 77 Rubber Group 79 Development of the Tire Division 80 Development of the ContiTech Division 82 105 Consolidated Financial Statements Continental AG – Statement of the Executive Board 106 Short Version in Accordance with HGB 84 Independent Auditor’s Report 107 Other Information 87 Consolidated Statement of Income 112 Dependent Company Report 87 Additional Disclosures and Notes Pursuant Consolidated Statement to Section 289a and Section 315a HGB 87 of Comprehensive Income 113 Remuneration of the Executive Board 88 Corporate Governance Declaration Pursuant Consolidated Statement of Financial Position 114 to Section 289f HGB 89 Consolidated Statement of Cash Flows 116 Report on Risks and Opportunities 90 Consolidated Statement of Changes in Equity 117 Risk and Opportunity Management and Notes to the Consolidated Financial Statements 118 Internal Control System 90 Material Risks 92 Segment Reporting 118 Financial Risks 92 General Information and Risks Related to the Markets in which Accounting Principles 125 Continental Operates 93 New Accounting Pronouncements 136 Risks Related to Continental’s Companies Consolidated and Information Business Operations 94 on Subsidiaries and Investments 139 Legal and Environmental Risks 96 Acquisition and Disposal of Companies Material Opportunities 98 and Business Operations 140 Statement on Overall Risk and Notes to the Consolidated Statement Opportunities Situation 99 of Income 142 Notes to the Consolidated Statement of Financial Position 152 Report on Expected Developments 100 Other Disclosures 197 Future General Conditions 100 Forecast of Macroeconomic Development 100 Forecast for Key Customer Sectors 101 Outlook for the Continental Corporation 102 205 Further Information Responsibility Statement by the Company’s Legal Representatives 206 Members of the Executive Board and Their Directorships 207 Members of the Supervisory Board and Their Directorships 208 Ten-Year Review – Corporation 210 Financial Calendar 211 Publication Details 212 4 Continental AG 2019 Annual Report To Our Shareholders Chairman’s Letter Chairman ’s Letter Allow me to begin with the bad news first. We are not satisfied with our results in the past fiscal year. Despite the enormously challenging environment, we had expected much more from a purely operational perspective. Our performance was certainly not due to a lack of dedication on the part of your global Continental team. Quite the opposite, in fact. As they have done so often before, Continental’s employees gave their all during this chal- lenging period. On behalf of my colleagues on the Executive Board, I would like to thank all our employees for their extraordinary hard work and commitment. Nonetheless, the automotive industry is currently weathering a storm, the effects of which will continue to be felt for years to come. Since 2018, a major production and sales crisis has been unfolding across global markets. In- stead of around 94 million passenger cars and light commercial vehicles, fewer than 89 million vehicles were manufactured worldwide in 2019. This year we are expecting a further decline, which is likely to be exacerbated by the effects of the coronavirus. As a result, production figures will fall for a third successive year. We do not antic- ipate a significant improvement in global production in the next five years, which is why we have revised our as- sumptions for the medium-term market development accordingly. Unresolved trade conflicts, drastically more stringent emission regulations in Europe and the rapidly developing digitalization of business processes and prod- ucts are also creating turbulence. All adjustments required as a result are now being made in parallel: reorganizing structures, reducing capacities, reducing or ceasing production, realigning portfolios, expanding staff training and accelerating the transition to new technologies. Backed by our strategy and strength, we have what it takes to suc- cessfully shape and spearhead the current transformation.
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