By Andrea Figueras

Continental said it expects its automotive division to face a limited impact from U.S. tariffs on auto parts due to a high share of imports that comply with the USMCA trade agreement.

"Negotiations with customers and suppliers are ongoing," the group said Wednesday.

The company said that global light-vehicle production volumes should be slightly down by a low-to-mid single-digit percentage in the second quarter.

Despite lower revenue, the group forecasts the adjusted earnings before interest and taxes margin to be at around the upper end of its guidance for the automotive business, which it intends to list in September. Overall, Continental expects the division to see an improvement compared with last year's second-quarter, on the back of more sustainable price agreements that led to a better starting base into this year.

For its tires division, it estimates a slight drop in sales and the adjusted EBIT margin at around the lower end of the guidance for the year. Continental noted that the gap between effectiveness of tariffs in the U.S. and the respective mitigation measures will impact the quarterly result. The measures will start to take effect from the second half of June, it said.

The ContiTech business should report a significant decline compared with the prior-year period. Earlier this year, the company said it intends to sell ContiTech--a unit that manufactures products such as hoses and conveyer belts as well as materials for vehicle interiors--in 2026.

Besides the potential threat from U.S. President Donald Trump's levies, the European automotive sector faces waning demand, a sluggish electric-vehicle market and fierce competition from Chinese rivals.

The group confirmed its guidance for free cash flow for the current year. It continues to anticipate adjusted free cash flow between 600 million euros and 1.0 billion euros ($708.5 million-$1.18 billion).

However, it noted that the second quarter is usually rather neutral in terms of free cash flow generation. "We should see that also in 2025, with ongoing restructuring and spin-off related efforts leading to a slightly negative free cash flow expectation," it said.

The group will publish second-quarter results on Aug. 5.

Write to Andrea Figueras at andrea.figueras@wsj.com

(END) Dow Jones Newswires

July 02, 2025 12:25 ET (16:25 GMT)

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