Continental Profits Beat Forecasts

Greater demand from customers and increased production in lower-cost areas helped raise Continental’s first quarter profits by 48 per cent – far higher than expected. 1Q net income was 129.5 million Euro (1Q 2003: 87.4 million), which was nearly 30 million Euro higher than predicted by industry analysts. Turnover for the period was up slightly too; from 2.82 billion Euros in 1Q last year to 2.99 billion Euros in the first three m onths of 2004.

The consolidated operating result (or EBIT) was up 34.5 per cent to 246.7 million Euros (183.4 million) and the return on sales was 8.3 per cent, compared with 6.5 per cent last year. „All divisions contributed their share“ said Dr. Alan Hippe, who is the member of the Executive Board in charge of Finance and this is borne out by the figures below.

Continental Automotive Systems sales were up by 8.6 per cent, although currency exchange effects reduced this to 4.5 per cent. The EBIT figure was 40.7 per cent higher than in 1Q 2003 (115.2 million Euros against 81.9 million) and the return on sales 9.2 per cent compared with 6.9 per cent a year ago.

Passenger and light truck tyre sales rose 6.8 per cent, but 2.2 per cent after taking currency factors into account. EBIT was up 37.3 per cent (78.1 million Euros compared to 56.9 million) and the return on sales rose to 8.5 per cent from 6.3 per cent. Worldwide OE sales volumes increased by 12 per cent, while the European replacement business saw an increase of eight per cent. Sales in the NAFTA region fell in 1Q, but the positive European business more than compensated for these losses.

Commercial Vehicle Tyre sales were up 9.9 per cent, disregarding the effects of foreign exchange and the acquisition of Continental Sime Tyre. Including these effects, sales were up 20 per cent and EBIT 18.2 per cent higher, from 11 million Euros to 13 million and the return on sales fell slightly, from 3.9 per cent to 3.8 per cent. The volume of tyres sold in Europe (OE and replacement) was up nine per cent, and NAFTA region sales were up five per cent.

The exchange rate effect on ContiTech sales was less pronounced, with sales rising eight per cent and, after foreign exchange effects, 7.8 per cent. EBIT was 17.5 per cent higher, at 495.2 million (459.4 million) and the return on sales rose from 8.9 per cent to 9.8 per cent.

Manfred Wennemer, Chairman of Continental’s Executive Board, was delighted with the results, saying: „Considering that the dynamics of the global automotive activity remain restrained, this demonstrates our strong position amongst international competition.“ Looking ahead, Wennemer said: „We anticipate that total passenger car production this year will remain at the level of 2003, and that truck production will rise slightly in Western Europe and increase strongly in the NAFTA region.“ He also expects price pressure to continue, notably in the USA. Wennemer concluded: „For 2004 as a whole, we are expecting a further increase in our consolidated sales and operating result before potential restructuring costs in North America.“