German tiremaker Continental AG raised its 2026 dividend to €2.70 per share but signaled weaker-than-expected profits, with adjusted EBIT margin guidance of 11% to 12.5% falling 4% short of analyst consensus. The guidance implies group EBIT of approximately €2.13 billion, below the €2.2 billion street estimate. Tyre division margins, a core business, are projected at 13% to 14.5%, down from 13.6% in 2025, amid persistent cost pressures. CFO Roland Welzbacher acknowledged challenges would persist, stating, "We’re aiming to increase earnings in 2026 despite the difficult environment."

The tyre segment underperformed, with 2026 margin guidance of 13% to 14.5% translating to €1.9 billion in midpoint EBIT, 5% below consensus. ContiTech, a subsidiary, saw EBIT plunge 36% year-on-year to €46 million in Q4, with margins collapsing to 3.2% from 7.7% in 2024. Continental initiated a structured sale process for ContiTech, targeting 2026 margin recovery to 7% to 8.5% if industrial markets rebound.

Full-year sales declined 2% to €19.7 billion, while adjusted EBIT fell to €2.0 billion from €2.2 billion. Non-cash restructuring charges of €1.2 billion drove a net loss of €165 million, reversing 2024’s €1.2 billion profit. Adjusted free cash flow surged 60.4% to €959 million, though operating cash flow dropped to €2.19 billion. The board emphasized strategic realignment, with CEO Christian Kötz noting the ContiTech sale marks the final phase of restructuring.

The dividend hike to €2.70 per share signals confidence in long-term cash generation despite near-term headwinds. Investors will closely monitor Continental’s ability to stabilize tyre margins and execute the ContiTech divestiture. Analysts highlighted the company’s focus on core tire operations as critical to navigating sector-specific challenges.