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Continental expects 2021 EBIT margin of 5%-6%

The logo of Continental is pictured on a rim in Hanover

BERLIN (Reuters) - German automotive parts maker Continental AG on Tuesday said it expects 2021 sales and profit margin to grow despite expected additional costs due to chip shortages.

Continental expects sales to reach 40.5 to 42.5 billion euros ($48-$50.4 billion) and its margin on adjusted earnings before interest and tax (EBIT) to hit 5% to 6% this year.

The outlook incorporated additional logistics expenses of around 200 million euros from supply chain constraints related to semiconductor components and additional research and development expenses of 200 million to 250 million euros in its autonomous mobility and safety unit, the group said.

It said it will adjust the outlook depending on the outcome of the spin-off of its powertrain unit Vitesco which is planned in the second half of the year.

The Hanover-based company reported a 12.7% drop in group sales to 37.7 billion euros, thanks in part to falling revenue in the Automotive, Rubber and Powertrain divisions.

It posted a free cash flow of 1.109 billion euros in 2020 before acquisitions and carve-out effects for the group, down from 1.343 billion euros a year earlier.

Shares in Continental were expected to fall 3.3% in early Frankfurt trade.

($1 = 0.8435 euros)

(Reporting by Kirsti Knolle and Riham Alkousaa, editing by Thomas Escritt)