Continental AG (CTTAF) (Q3 2026) Earnings Call Highlights: Strong Margin Execution and Raised ...

Q: What is the raw material outlook for Q4 2026 and H1 2027, and how should we think about holding costs after the ContiTech disposal? A: CFO Roland Welsbacher said Q4 will bring a mid- to high-double-digit million euro raw material headwind with no inventory valuation offset, as higher oil prices flow through. For 2027, the raw material headwind is expected to be almost entirely concentrated in H1 2027 with a peak in Q1, turning broadly neutral to slightly positive in H2, for a full-year headwind in the low- to mid-triple-digit million euro range. Holding costs are still assumed at EUR30 million to EUR35 million per quarter and are not expected to come down quickly in 2027, as the company first needs to close the ContiTech transaction before reshaping the organization.

Q: Can you quantify the Q3 tariff reimbursement and inventory valuation benefits, and will they repeat in Q4? A: CFO Roland Welsbacher said Q3 benefited from a low- to mid-double-digit million euro year-on-year tariff effect plus a second wave of IEPA refunds in the low-double-digit million euro range in the Americas. He said there are no additional IEPA refunds foreseen for Q4 and no legal change expected. On raw materials, gross costs rose by a mid-double-digit million euro amount but were fully offset by positive inventory valuation effects, leaving a net benefit of about EUR15 million. Neither support is expected to repeat in Q4.

Q: Volumes have been negative for several quarters. Do you expect Q4 to be less negative than Q3, and when could volumes turn positive in 2027? A: CEO Christian Kutz said Q4 volumes will still be down year-on-year but less negative than in Q3, with sequential improvement. Truck OE is up in both relevant regions, European replacement is slightly improving, and the deterioration in Americas replacement is easing. He remains cautious on OE markets in Q4 and 2027, sees a relatively stable European PLT replacement market, continued weakness in South America, and stabilization in North America replacement as sell-in remains below sell-out. He expects a positive volume contribution at some point in 2027 but gave no firm timing.

Q: What are the initiatives to improve profitability in the Americas, and are you seeing price increases in the market? A: CEO Christian Kutz said the region's lower profitability versus other regions stems from a higher OE and truck tire share, weaker manufacturing performance still affected by pandemic-era effects, and capacity utilization challenges, especially in U.S. truck tires. Countermeasures include consciously optimizing the PLT OE portfolio, which will continue in 2027, improving operational performance quarter by quarter, adjusting capacity where sensible, right-sizing South America, and focusing on price mix through products such as the all-weather tire line and the AT/SUV portfolio. He did not give a specific read on market price increases.

Q: What is driving the strong APEC performance despite weakness among European OEMs in China, and what is your EV tire exposure? A: CEO Christian Kutz said APEC is less dependent on overall light vehicle production because the majority of business is aftermarket, although OE share is higher than in other regions. Most of the China OE business is with Chinese OEMs, and Continental benefits as those OEMs export vehicles fitted with its tires, creating follow-up replacement potential outside China. On EVs, he said electrification is a positive mix contributor because EVs need larger tires. In China, more than 75% of OE volume goes to electric or hybrid vehicles; the U.S. EV share is very low; and in Europe the EV share is slightly above the combustion engine share. Replacement EV share remains minor but holds profitable potential.

Q: What is the outlook for production-related and non-production fixed cost headwinds into 2027, and what is driving the lower tax rate guidance? A: CFO Roland Welsbacher said the production-related bucket includes variable and fixed production costs such as transport and energy, which are heavily oil-price driven with low visibility, plus operational cost effects and wages and salaries that should broadly follow local inflation. He declined to confirm the roughly EUR50 million quarterly headwind as a 2027 run rate, citing dependence on external factors. On tax, he said the 24% guidance versus the roughly 28% to 29% run rate in the first nine months is driven by country mix, and management preferred not to change the guidance without a solid basis.

Q: What is the dealer inventory situation in Europe, what is the revenue impact of the My Car disposal in APEC, and where do you see white space opportunities in NAFTA? A: CEO Christian Kutz said European dealer inventories are at a normal level, with dealers reluctant to build working capital and tariffs mainly driving pre-imports at the Tier 3-4 level rather than premium inventories. Winter season business is now picking up with increasing ad hoc orders, and he sees no reason to expect unhealthy inventory levels entering 2027. CFO Roland Welsbacher estimated the My Car disposal revenue impact at north of EUR200 million, probably toward EUR230 million to EUR250 million. In NAFTA, Kutz cited all-weather tires and the SUV AT/4x4 segment, where Continental is underrepresented, as areas for investment in products and production capacity.

Q: What is the outlook for winter tire volumes and mix in Europe and North America? A: CEO Christian Kutz said winter tire volumes are slightly down year-on-year in absolute terms, but the mix is very healthy, supported by

For the complete transcript of the earnings call, please refer to the full earnings call transcript .