BERLIN (Reuters) – Continental reported a 7.1 percent rise in adjusted operating profit to 637 million euros on Wednesday and slightly raised its outlook in its tire division after a strong quarter.

The German auto parts maker raised the adjusted margin outlook for its tire business to 12.5-13.5%, up from 12-13% previously, as higher prices offset a decline in North America and in Europe.

Continental faced transportation costs, currency effects and reduced working capital in the second quarter, but took a more positive tone on Wednesday, with quarterly profit up 7.1% on a year.

The inventory reduction is expected to continue into the fourth quarter, in order to achieve adjusted free cash flow of 0.8 billion to 1.2 billion euros.

Its automotive business, which suffered a loss in the second quarter, returned to profitability with an adjusted profit margin of 2.8%, largely due to price increases and stabilizing supply chains.

However, negative exchange rates have prompted the company to slightly revise downwards the sales outlook for the automotive business, to 20 billion euros compared to 21 billion previously.

(Reporting by Victoria Waldersee; by Mariana Abreu, editing by Kate Entringer)

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