Continental spin-off Vitesco struggles in market debut

FILE PHOTO: The Vitesco company logo is seen at Continental's pilot location for industry 4.0 applications in Regensburg, Germany, February 28, 2020. REUTERS/Michael Dalder/File Photo

BERLIN (Reuters) - Shares Vitesco Technologies were broadly flat on Thursday in a volatile market debut that highlights the challenges faced by the German auto parts manufacturer spun off from Continental.

The stagnant share price, combined with a drop in the price of Continental's shares compared with Wednesday's close, meant that Continental shareholders were left with a drop in the value of their holdings as a result of the spinoff.

Continental shareholders received one Vitesco share for every five Continental shares they owned. At 1506 CET, that was worth about 5% less than five Continental shares at yesterday's market close.

Continental, among the world's largest auto suppliers, delayed the spinoff of Vitesco - which produces powertrains for internal combustion engine (ICE), hybrid and electric cars - by two years due to unfavourable market conditions worsened by the coronavirus pandemic.

"We were confronted by developments that no one had foreseen," Vitesco CEO Andreas Wolf said at the Frankfurt stock exchange, adding "the corona crisis fully confirmed our strategy... e-mobility is booming."

Vitesco shares started trading at 59.80 euros per share and swung between 56.89-66.88 euros in the course of the day. At 1506 GMT, they traded at around 58.7 euros per share, giving the company a market value of 2.34 billion euros ($2.75 billion).

The listing comes as automotive suppliers are struggling to reorient their production lines to stay relevant amid the EV transition, with electric cars requiring not only less parts but new technologies like batteries and software - not traditionally the expertise of Germany's auto industry.

Vitesco currently earns the vast majority of its revenue from parts for ICE cars, but Wolf told Reuters this month he hopes to break even on sales for electric vehicle components by 2024 and reap three quarters of revenues from electric vehicle parts by 2030.

In 2020, Vitesco's sales fell 12% to 8 billion euros as the COVID-19 pandemic combined with a global chip shortage and rising raw material supplies stymied sales across the auto industry.

Still, sales in the first half of 2021 were up 29% on the previous year at 4.4 billion euros, with a profit margin of 1.9%.

($1 = 0.8510 euros)

(Reporting by Victoria Waldersee, Arno Schuetze; Additional reporting by Alexander Huebner and Riham Alkousaa; Editing by Christoph Steitz, Susan Fenton and David Evans)

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