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Continental (Baa2/BBB): 4Q23 Results

CONSUMER CYCLICALS

Neutral for spreads.

  • 4Q Revenue missed consensus by 2.5%, up 1.5% YoY. FY adj. EBIT, which grew +32%, missed by 1.5%.
  • FY FCF of €1.16bn was 12% better than expected on lower capex and disposals. Net debt down to €4bn from €4.5bn, 4% lower than expected.
  • Leverage down to 0.9x, with Continental’s target “well below 1x”.
  • FY24 forecasts largely in line with consensus. “Special expenses” around €1bn will drag on FCF however.
  • Management expects higher labour costs to weigh on 2024 earnings. Interesting data point for the disinflation conversation.

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