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Continental AG

Quarterly Report May 8, 2024

83_10-q_2024-05-08_e6a3fe00-8052-45f2-89ca-abb2fe76855c.pdf

Quarterly Report

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Quarterly Statement as at March 31, 2024

After a Weak Start: Continental Confirms Its Full-year Outlook

  • › Consolidated sales of €9.8 billion (Q1 2023: €10.3 billion, -5.0 percent)
  • › Adjusted EBIT of €196 million (Q1 2023: €574 million, -65.8 percent)
  • › Adjusted EBIT margin of 2.0 percent (Q1 2023: 5.6 percent)
  • › Net income attributable to the shareholders of the parent was -€53 million (Q1 2023: €382 million, -113.9 percent)
  • › Adjusted free cash flow of -€1.1 billion (Q1 2023: -€949 million, -14.4 percent)

› Outlook for 2024 unchanged: consolidated sales of around €41.0 billion to €44.0 billion; adjusted EBIT margin of around 6.0 to 7.0 percent

After a weak first quarter in 2024, Continental expects earnings to improve as the year progresses – particularly in the second half of the year. Based on this, Continental is confirming its outlook for the full year, as already announced together with the publication of its key figures for the first quarter on April 16, 2024. All in all, Continental still anticipates consolidated sales for 2024 of around €41.0 billion to €44.0 billion and an adjusted EBIT margin of around 6.0 to 7.0 percent.

In 2024, Continental will take a further step forward. The first quarter will be its weakest this year. The three group sectors – Automotive, Tires and ContiTech – will then see improvements as the year progresses.

Slight decline in automotive production in the first quarter of 2024

At the start of the year, global passenger car and light commercial vehicle production recorded a slight decline year-on-year, falling by around 1 percent compared with the first quarter of 2023 to 21.2 million units (Q1 2023: 21.4 million units). Vehicle production in our core market of Europe, in particular, was weaker from January to March 2024 than in the prior-year period, at around 4.4 million units (-3 percent). In North America, production rose slightly to around 3.9 million vehicles (+1 percent). China had a good start to the year, producing around 6.1 million vehicles in the first quarter of 2024, up 4 percent year-on-year. For the year as a whole, Continental still expects global passenger car and light commercial vehicle production to be roughly on par with the previous year, trending in a range of -1 to +1 percent.

Consolidated sales in the first quarter of €9.8 billion; adjusted EBIT margin of 2.0 percent.

In the first quarter of 2024, Continental achieved consolidated sales of €9.8 billion (Q1 2023: €10.3 billion, -5.0 percent). Its adjusted operating result was €196 million (Q1 2023: €574 million, -65.8 percent), corresponding to an adjusted EBIT margin of 2.0 percent (Q1 2023: 5.6 percent). Net income attributable to the shareholders of the parent in the first quarter amounted to -€53 million (Q1 2023: €382 million, -113.9 percent). Adjusted free cash flow was -€1.1 billion (Q1 2023: -€949 million, -14.4 percent). As announced, this was heavily impacted in the first quarter of 2024 by the €500-million payment for the buyback of shares in ContiTech AG (now operating under the name ContiTech Deutschland GmbH).

Development of the group sectors

In the Automotive group sector, sales decreased by 4.0 percent to €4.8 billion (Q1 2023: €5.0 billion). The adjusted EBIT margin was down year-on-year at -4.3 percent (Q1 2023: 0.8 percent). This was mainly due to lower production volumes, especially in Europe, as well as pending agreements from price negotiations with automotive manufacturers. Delayed product launches, weak business in North America and exchange-rate effects also had a negative impact, while salary increases hampered profitability. As the year progresses, price adjustments, initial savings from cost-cutting measures and efficiency improvements will lead to an increase in earnings.

The Tires group sector generated sales of €3.3 billion (Q1 2023: €3.5 billion, -5.0 percent). At 11.7 percent, its adjusted EBIT margin was still in the double digits, albeit down on the first quarter of the previous year (Q1 2023: 13.4 percent). The main reasons were weak tire markets in the truck and original equipment business, negative exchange-rate effects and fewer workdays in March. This, in turn, shifted the tire-replacement business to April, which already appears to be a considerably stronger month for earnings. In the months ahead, the Tires group sector will also benefit from an expected increase in demand.

The ContiTech group sector posted sales of €1.6 billion (Q1 2023: €1.7 billion, -4.8 percent) and an adjusted EBIT margin of 5.4 percent (Q1 2023: 6.5 percent) in the past quarter. Earnings were adversely impacted by weak industrial demand. In addition, the Original Equipment Solutions (OESL) business area, which makes up a large part of ContiTech's business with automotive manufacturers, is not expected to see improvements until the second half of the year.

Sales in the Contract Manufacturing group sector were €80 million in the first quarter of 2024 (Q1 2023: €154 million), and the adjusted EBIT margin was 0.9 percent (Q1 2023: 6.2 percent).

Outlook for fiscal 2024 unchanged

Continental expects the global production of passenger cars and light commercial vehicles in 2024 to be roughly on par with the previous year (-1 to +1 percent), with a negative development expected in its core market of Europe (-3 to -1 percent). This outlook takes into account the current tense geopolitical situation and its expected impact on production volumes in 2024. Higher costs for wages and salaries – amounting to around €0.5 billion – are expected to weigh heavily on our earnings position in fiscal 2024, with around half of these costs attributable to the Automotive group sector.

Based on the above assumptions as well as current exchange rates, we expect the following key financial figures for fiscal 2024:

  • › We expect the Continental Group to achieve sales in the range of around €41.0 billion to €44.0 billion and an adjusted EBIT margin of around 6.0 to 7.0 percent.
  • › We expect our Automotive group sector to achieve sales of around €20.0 billion to €22.0 billion and an adjusted EBIT margin of around 3.0 to 4.0 percent.
  • › We expect our Tires group sector to achieve sales of around €14.0 billion to €15.0 billion and an adjusted EBIT margin of around 13.0 to 14.0 percent.
  • › We expect our ContiTech group sector to achieve sales of around €6.6 billion to €7.0 billion and an adjusted EBIT margin of around 6.5 to 7.5 percent.
  • › In the Contract Manufacturing group sector, we anticipate sales of around €200 million to €300 million and an adjusted EBIT margin of around 0 percent.
  • › Consolidated amortization from purchase price allocations is expected to be around €100 million and affect mainly the Automotive and ContiTech group sectors.
  • › In addition, we expect negative special effects of around €450 million.
  • › In 2024, we expect the negative financial result to be around €350 million before effects from currency translation, effects from changes in the fair value of derivative instruments, and other valuation effects.
  • › The tax rate is expected to be around 27 percent.
  • › The capital expenditure ratio is expected to be around 6.0 to 7.0 percent of sales in fiscal 2024.
  • › In 2024, we are planning on adjusted free cash flow of approximately €0.7 billion to €1.1 billion.

Key Figures for the Continental Group

January 1 to March 31
Continental Group in € millions 2024 2023
Sales 9,788 10,306
EBITDA 661 1,070
in % of sales 6.8 10.4
EBIT 118 531
in % of sales 1.2 5.2
Net income attributable to the shareholders of the parent –53 382
Basic earnings per share in € –0.27 1.91
Diluted earnings per share in € –0.27 1.91
Research and development expenses (net) 825 791
in % of sales 8.4 7.7
Depreciation and amortization1 543 539
thereof impairment2 4 0
Capital expenditure3 432 429
in % of sales 4.4 4.2
Operating assets as at March 31 20,163 20,864
Number of employees as at March 314 200,888 202,929
Adjusted sales5 9,761 10,286
Adjusted operating result (adjusted EBIT)6 196 574
in % of adjusted sales 2.0 5.6
Free cash flow –1,083 –952
Net indebtedness as at March 31 5,205 5,539
Gearing ratio in % 36.4 39.4

1 Excluding impairment on financial investments.

2 Impairment also includes necessary reversals of impairment losses.

3 Capital expenditure on property, plant and equipment, and software.

4 Excluding trainees.

5 Before changes in the scope of consolidation.

Key Figures for the Group Sectors

January 1 to March 31
Automotive in € millions 2024 2023
Sales 4,813 5,015
EBITDA 12 269
in % of sales 0.3 5.4
EBIT –255 16
in % of sales –5.3 0.3
Research and development expenses (net) 688 662
in % of sales 14.3 13.2
Depreciation and amortization1 267 254
thereof impairment2 3 0
Capital expenditure3 230 221
in % of sales 4.8 4.4
Operating assets as at March 31 9,023 9,099
Number of employees as at March 314 101,294 100,719
Adjusted sales5 4,813 5,015
Adjusted operating result (adjusted EBIT)6 –205 39
in % of adjusted sales –4.3 0.8
January 1 to March 31
Tires in € millions 2024 2023
Sales 3,290 3,463
EBITDA 570 660
in % of sales 17.3 19.1
EBIT 374 458
in % of sales 11.4 13.2
Research and development expenses (net) 88 85
in % of sales 2.7 2.4
Depreciation and amortization1 195 202
thereof impairment2 1 0
Capital expenditure3 139 161
in % of sales 4.2 4.6
Operating assets as at March 31 7,451 7,808
Number of employees as at March 314 56,461 57,573
Adjusted sales5 3,290 3,443
Adjusted operating result (adjusted EBIT)6 386 461
in % of adjusted sales 11.7 13.4

1 Excluding impairment on financial investments.

2 Impairment also includes necessary reversals of impairment losses.

3 Capital expenditure on property, plant and equipment, and software.

4 Excluding trainees.

5 Before changes in the scope of consolidation.

January 1 to March 31
ContiTech in € millions 2024 2023
Sales 1,647 1,731
EBITDA 147 172
in % of sales 8.9
9.9
EBIT 73
96
in % of sales 4.4
5.6
Research and development expenses (net) 49
44
in % of sales 3.0
2.5
Depreciation and amortization1 74
76
thereof impairment2
Capital expenditure3 57
41
in % of sales 3.5
2.4
Operating assets as at March 31 3,240 3,262
Number of employees as at March 314 41,559 42,276
Adjusted sales5 1,620 1,731
Adjusted operating result (adjusted EBIT)6 88
113
in % of adjusted sales 5.4
6.5
January 1 to March 31
Contract Manufacturing in € millions 2024 2023
Sales 80 154
EBITDA 4 16
in % of sales 5.3 10.6
EBIT 1 9
in % of sales 0.8 6.1
Research and development expenses (net) 0 0
in % of sales 0.0 0.0
Depreciation and amortization1 4 7
thereof impairment2
Capital expenditure3 1 1
in % of sales 1.0 0.6
Operating assets as at March 31 320 497
Number of employees as at March 314 1,075 1,845
Adjusted sales5 80 154
Adjusted operating result (adjusted EBIT)6 1 10
in % of adjusted sales 0.9 6.2

1 Excluding impairment on financial investments.

2 Impairment also includes necessary reversals of impairment losses.

3 Capital expenditure on property, plant and equipment, and software.

4 Excluding trainees.

5 Before changes in the scope of consolidation.

Consolidated Statement of Income

This quarterly statement was prepared in accordance with the accounting and measurement methods described in the International Financial Reporting Standards (IFRS) applicable at the end of the reporting period and endorsed by the European Union.

January 1 to March 31
€ millions 2024 2023
Sales 9,788 10,306
Cost of sales –7,852 –8,037
Gross margin on sales 1,936 2,269
Research and development expenses –1,038 –1,030
Selling and logistics expenses –654 –624
Administrative expenses –318 –304
Other income 361 361
Other expenses –178 –146
Income from equity-accounted investees 9 4
Other income from investments 0 0
EBIT 118 531
Interest income 24 22
Interest expense –103 –86
Effects from currency translation –7 29
Effects from changes in the fair value of derivative instruments, and other valuation effects –13 0
Financial result –99 –34
Earnings before tax 19 497
Income tax expense –70 –105
Net income –51 393
Non-controlling interests –2 –10
Net income attributable to the shareholders of the parent –53 382
Basic earnings per share in € –0.27 1.91
Diluted earnings per share in € –0.27 1.91

Consolidated Statement of Comprehensive Income

January 1 to March 31
€ millions 2024 2023
Net income –51 393
Items that will not be reclassified to profit or loss
Remeasurement of defined benefit plans1 129 –27
Fair value adjustments1 137 –32
Currency translation1 –8 5
Other investments 0 –50
Fair value adjustments1 1 –50
Currency translation1 0 0
Tax on other comprehensive income –40 14
Items that may be reclassified subsequently to profit or loss
Currency translation1 159 5
Effects from currency translation1 159 5
Reclassification adjustments to profit or loss 0
Other comprehensive income 248 –59
Comprehensive income 197 334
Attributable to non-controlling interests 4 –6
Attributable to the shareholders of the parent 201 329

1 Including non-controlling interests.

Consolidated Statement of Financial Position

Assets

€ millions March 31, 2024 Dec. 31, 2023 March 31, 2023
Goodwill 3,195 3,187 3,200
Other intangible assets 785 820 921
Property, plant and equipment 11,700 11,722 11,409
Investment property 11 11 11
Investments in equity-accounted investees 309 299 308
Other investments 119 118 121
Deferred tax assets 2,599 2,512 2,158
Defined benefit assets 115 111 95
Long-term derivative instruments and interest-bearing investments 101 89 101
Long-term other financial assets 266 272 263
Long-term other assets 24 24 113
Non-current assets 19,224 19,165 18,699
Inventories 6,447 6,276 7,194
Trade accounts receivable 7,829 7,569 8,430
Short-term contract assets 116 103 123
Short-term other financial assets 123 136 128
Short-term other assets 1,172 1,144 1,136
Income tax receivables 381 305 285
Short-term derivative instruments and interest-bearing investments 132 120 120
Cash and cash equivalents 2,349 2,923 2,252
Assets held for sale 11 11 0
Current assets 18,560 18,588 19,668
Total assets 37,784 37,753 38,367

Equity and liabilities

€ millions March 31, 2024 Dec. 31, 2023 March 31, 2023
Subscribed capital 512 512 512
Capital reserves 4,156 4,156 4,156
Retained earnings 10,714 10,767 10,293
Other comprehensive income –1,505 –1,759 –1,373
Equity attributable to the shareholders of the parent 13,877 13,676 13,588
Non-controlling interests 436 449 469
Total equity 14,313 14,125 14,057
Long-term employee benefits 3,035 3,148 2,685
Deferred tax liabilities 90 72 58
Long-term provisions for other risks and obligations 671 703 641
Long-term indebtedness1 4,609 4,528 4,782
Long-term other financial liabilities 9 8 10
Long-term contract liabilities 6 6 7
Long-term other liabilities 27 28 28
Non-current liabilities1 8,446 8,494 8,212
Short-term employee benefits 1,623 1,391 1,467
Trade accounts payable 6,585 6,875 7,368
Short-term contract liabilities 174 195 207
Income tax payables 571 541 526
Short-term provisions for other risks and obligations 1,062 1,081 956
Short-term indebtedness1 3,177 2,642 3,230
Short-term other financial liabilities 1,049 1,670 1,589
Short-term other liabilities 783 739 756
Current liabilities1 15,025 15,134 16,098
Total equity and liabilities 37,784 37,753 38,367

1 Amendments to IAS 1, Presentation of Financial Statements, clarify the classification of current and non-current liabilities from the 2024 reporting year onward. The comparative periods have been adjusted accordingly.

Consolidated Statement of Cash Flows

January 1 to March 31
€ millions 2024 2023
Net income –51 393
Income tax expense 70 105
Financial result 99 34
EBIT 118 531
Interest paid –89 –54
Interest received 28 33
Income tax paid –187 –168
Dividends received 0 1
Depreciation, amortization, impairment and reversal of impairment losses 543 539
Income from equity-accounted investees and other investments, incl. impairment and reversal of impairment losses –9 –4
Gains/losses from the disposal of assets, companies and business operations 0 –3
Changes in
inventories –139 –467
trade accounts receivable –197 –633
trade accounts payable –320 –291
employee benefits and other provisions 156 141
other assets and liabilities as well as other non-cash effects –616 –220
Cash flow arising from operating activities –712 –595
Capital expenditure on property, plant and equipment, and software –376 –361
Capital expenditure on intangible assets from development projects and miscellaneous –7 –7
Disposal of property, plant and equipment, and intangible assets 9 14
Acquisition of companies and business operations –1 –3
Disposal of companies and business operations
Cash flow arising from investing activities
4
–371

–357
Cash flow before financing activities (free cash flow) –1,083 –952
Repayment of lease liabilities –82 –78
Change in other indebtedness 617 342
Change in derivative instruments and interest-bearing investments –33 –24
Other cash changes –2 –4
Dividends paid to and cash changes from equity transactions with non-controlling interests –1 –4
Cash flow arising from financing activities 499 232
Change in cash and cash equivalents –584 –720
Cash and cash equivalents at the beginning of the reporting period 2,923 2,988
Effect of exchange-rate changes on cash and cash equivalents 9 –16
Cash and cash equivalents at the end of the reporting period 2,349 2,252

Consolidated Statement of Changes in Equity

Difference from
€ millions Subscribed
capital1
Capital
reserves
Retained
earnings
Successive
purchases
remeasurement
of defined
benefit plans
currency
translation
financial
instruments2
Total Non
controlling
interests
Total
As at January 1, 2023 512 4,156 9,911 –312 –774 –296 63 13,259 476 13,735
Net income 382 382 10 393
Other comprehensive income –17 10 –47 –54 –5 –59
Net profit for the period 382 –17 10 –47 329 6 334
Dividends paid/resolved –12 –12
As at March 31, 2023 512 4,156 10,293 –312 –790 –286 16 13,588 469 14,057
As at January 1, 2024 512 4,156 10,767 –311 –993 –456 1 13,676 449 14,125
Net income –53 –53 2 –51
Other comprehensive income 91 164 –2 254 –6 248
Net profit for the period –53 91 164 –2 201 –4 197
Dividends paid/resolved –9 –9
As at March 31, 2024 512 4,156 10,714 –311 –902 –292 –1 13,877 436 14,313

1 Divided into 200,005,983 (PY: 200,005,983) outstanding shares with dividend and voting rights.

2 The change in the difference arising from financial instruments, including deferred taxes, was due to other investments of -€2 million (PY: -€47 million).

Segment Reporting

Segment report for the period from January 1 to March 31, 2024

€ millions Automotive Tires ContiTech Contract
Manufacturing
Other/
Holding/
Consolidation
Continental
Group
External sales 4,809 3,274 1,625 80 9,788
Intercompany sales 4 16 23 0 –43
Sales (total) 4,813 3,290 1,647 80 –43 9,788
EBIT (segment result) –255 374 73 1 –74 118
in % of sales –5.3 11.4 4.4 0.8 1.2
Depreciation and amortization1 267 195 74 4 3 543
thereof impairment2 3 1 4
Capital expenditure3 230 139 57 1 5 432
in % of sales 4.8 4.2 3.5 1.0 4.4
Operating assets as at March 31 9,023 7,451 3,240 320 128 20,163
Number of employees as at March 314 101,294 56,461 41,559 1,075 499 200,888
Adjusted sales5 4,813 3,290 1,620 80 –43 9,761
Adjusted operating result (adjusted EBIT)6 –205 386 88 1 –73 196
in % of adjusted sales –4.3 11.7 5.4 0.9 2.0

1 Excluding impairment on financial investments.

2 Impairment also includes necessary reversals of impairment losses.

3 Capital expenditure on property, plant and equipment, and software.

4 Excluding trainees.

5 Before changes in the scope of consolidation.

6 Before amortization of intangible assets from purchase price allocation (PPA), changes in the scope of consolidation, and special effects.

Segment report for the period from January 1 to March 31, 2023

€ millions Automotive Tires ContiTech Contract
Manufacturing
Other/
Holding/
Consolidation
Continental
Group
External sales 5,012 3,433 1,707 154 10,306
Intercompany sales 3 29 24 0 –57
Sales (total) 5,015 3,463 1,731 154 –57 10,306
EBIT (segment result) 16 458 96 9 –48 531
in % of sales 0.3 13.2 5.6 6.1 5.2
Depreciation and amortization1 254 202 76 7 1 539
thereof impairment2 0 0 0
Capital expenditure3 221 161 41 1 4 429
in % of sales 4.4 4.6 2.4 0.6 4.2
Operating assets as at March 31 9,099 7,808 3,262 497 198 20,864
Number of employees as at March 314 100,719 57,573 42,276 1,845 516 202,929
Adjusted sales5 5,015 3,443 1,731 154 –57 10,286
Adjusted operating result (adjusted EBIT)6 39 461 113 10 –47 574
in % of adjusted sales 0.8 13.4 6.5 6.2 5.6

1 Excluding impairment on financial investments.

2 Impairment also includes necessary reversals of impairment losses.

3 Capital expenditure on property, plant and equipment, and software.

4 Excluding trainees.

5 Before changes in the scope of consolidation.

Reconciliation of sales to adjusted sales and of EBITDA to adjusted operating result (adjusted EBIT) from January 1 to March 31, 2024

€ millions Automotive Tires ContiTech Contract
Manufacturing
Other/
Holding/
Consolidation
Continental
Group
Sales 4,813 3,290 1,647 80 –43 9,788
Changes in the scope of consolidation1 –27 –27
Adjusted sales 4,813 3,290 1,620 80 –43 9,761
EBITDA 12 570 147 4 –72 661
Depreciation and amortization2 –267 –195 –74 –4 –3 –543
EBIT –255 374 73 1 –74 118
Amortization of intangible assets from
purchase price allocation (PPA)
14 1 12 28
Changes in the scope of consolidation1 0 0
Special effects
Impairment on goodwill
Impairment3 2 2
Restructuring4 24 1 –4 20
Restructuring-related expenses 4 5 0 9
Severance payments 7 2 3 0 1 13
Gains and losses from disposals of
companies and business operations
3 3
Other 3 3
Adjusted operating result (adjusted EBIT) –205 386 88 1 –73 196

1 Changes in the scope of consolidation include additions and disposals as part of share and asset deals. Adjustments were made for additions in the reporting year and for disposals in the comparative period of the prior year.

2 Excluding impairment on financial investments.

3 Impairment also includes necessary reversals of impairment losses. It does not include impairment that arose in connection with a restructuring and impairment on financial investments and goodwill.

4 Also includes restructuring-related impairment losses totaling €2 million (Automotive €1 million; Tires €1 million).

Reconciliation of sales to adjusted sales and of EBITDA to adjusted operating result (adjusted EBIT) from January 1 to March 31, 2023

€ millions Automotive Tires ContiTech Contract
Manufacturing
Other/
Holding/
Consolidation
Continental
Group
Sales 5,015 3,463 1,731 154 –57 10,306
Changes in the scope of consolidation1 0 –20 –20
Adjusted sales 5,015 3,443 1,731 154 –57 10,286
EBITDA 269 660 172 16 –47 1,070
Depreciation and amortization2 –254 –202 –76 –7 –1 –539
EBIT 16 458 96 9 –48 531
Amortization of intangible assets from
purchase price allocation (PPA)
15 2 14 31
Changes in the scope of consolidation1 0 –8 0 –7
Special effects
Impairment on goodwill
Impairment3 0 0 0
Restructuring 0 1 0 0
Restructuring-related expenses 5 6 0 11
Severance payments 3 2 2 0 1 8
Gains and losses from disposals of
companies and business operations
Other
Adjusted operating result (adjusted EBIT) 39 461 113 10 –47 574

1 Changes in the scope of consolidation include additions and disposals as part of share and asset deals. Adjustments were made for additions in the reporting year and for disposals in the comparative period of the prior year.

2 Excluding impairment on financial investments.

3 Impairment also includes necessary reversals of impairment losses. It does not include impairment that arose in connection with a restructuring and impairment on financial investments and goodwill.

Hanover, April 22, 2024

Continental Aktiengesellschaft The Executive Board

This quarterly statement has been prepared in euros. Unless otherwise stated, all amounts are shown in millions of euros (€ millions). Please note that differences may arise as a result of the use of rounded amounts and percentages.

Financial Calendar

March 7
March 7
April 26
May 8
August 7
November 11
2025
Annual Press Conference March
Analyst and Investor Conference Call March
Annual Shareholders' Meeting April 25
Quarterly Statement as at March 31, 2025 May
Half-Year Financial Report as at June 30, 2025 August
Quarterly Statement as at September 30, 2025 November

Publication Details

Continental Aktiengesellschaft Continental-Plaza 1 30175 Hanover, Germany Phone: +49 511 938-01 Fax: +49 511 938-81770

E-mail: [email protected] Commercial register of the Hanover Local Court, HR B 3527

All financial reports are available online at: www.continental-ir.com

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