Continental AG Cuts 2016 Forecast on Antitrust, Warranty Cases

  • Adjusted Ebit expected at 10.5% of revenue instead of 11%
  • Earthquake disruption at Japanese supplier also to hurt profit

Continental AG lowered its 2016 profitability forecast because of provisions for antitrust fines and warranty spending that will contribute to a 480 million-euro ($528 million) cut in the operating profit at German company’s car-parts unit.

Adjusted earnings before interest and taxes will amount to 10.5 percent of revenue compared with an earlier prediction of a margin exceeding 11 percent, Hanover-based Continental said Monday in a statement. Costs from disruptions at a supplier in Japan because of an earthquake in August will also hurt profit.

Earnings at the chassis & safety and interior divisions will be reduced by 390 million euros because of potential warranty costs for products made between 2004 and 2010 as well as the possible competition fines, Continental said. Vincent Charles, a spokesman, declined to specify either the type of product or the sites of regulatory cases that prompted the provisions, saying negotiations on any costs are still under way.

The company’s 2015 annual report outlined pending antitrust probes involving components businesses in Brazil and South Korea, as well as a search by European Union authorities at an undisclosed unit.

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