Continental Continues Strong Performance

Continental has released third quarter profits that show what the company calls “another record-breaking performance.” The international automotive supplier increased its consolidated sales in the first nine months of 2004 by 8.6 per cent. In the first nine months the figure, including foreign exchange effects and consolidation changes, totals at 9.214 billion euros compared with 8.485 billion euros the same time last year. The was little mention of the costs incurred by the company’s failed Russian joint venture.

The company’s consolidated operating result (EBIT) increased to 777.3 million euros, up 17.6 per cent from 661 million euros last year. Continental’s return on sales amounted to 8.4 per cent, a figure that was hit by the 129 million euros restructuring programme at Continental’s Mayfield plant. This impacted the result by 108.4 million euros. Before the restructuring, return on sales amounted to 9.6 per cent. Consolidated net income after taxes increased 75.8 per cent from 244.9 million euros to 430.6 million, with earnings per share rising from 1.86 to 3.17 euros.

“Once again our figures demonstrate that we are continuing on the road to success despite partly unfavourable conditions such as the sluggish global automotive economy,” said Continental executive board chairman, Manfred Wennemer.

There was also a strong performance in the company’s passenger and light truck business. Before foreign exchange effects, sales of the passenger and light truck tyres (PLT) division were up 7.7 per cent for the first nine months of this year. Including exchange rate effects, sales improved by 5.1 per cent from 2.82 billion euros to nearly 2.7 billion.

According to the company, overall replacement unit volumes declined in the NAFTA region, although Continental says that because it introduced an improved product mix and has implemented price increases it has still been able to “surpass internal goals.” The company went on to explain that any losses made in this area were offset by the company’s European business. In addition Continental notes that higher raw material prices and welfare expenses in the US also continued to impact earnings.

There was a particularly good performance in commercial vehicle tyres, which improved earnings by 22 per cent. Including exchange rate effects and the consolidation of Continental Sime Tyre, sales went up 23.4 per cent from 893.9 million to 1.1 billion euros. In Europe the company reports that total volume sold to the vehicle manufacturers and to the replacement market increased by 10 per cent, while capacity bottlenecks kept unit sales at the prior year’s level in the NAFTA region. As with the passenger and light truck divisions, the company says higher material costs and additional welfare expenses in the US impacted earnings. The operating result of the commercial vehicle tyres division rose from 57.4 million to 70.0 million euros, a 22 per cent increase. The return on sales amounted to 6.3 per cent.

Dr Hippe pointed out the positive effects of Continental’s takeover of Phoenix AG, approved by the EU on October 26: “We will be able to further expand the position of the ContiTech division as one of the world’s leading specialists in rubber and plastics technology as well as to realise the calculated synergy effects. The concessions required by the antitrust authorities have only a minor impact on the economic effectiveness of the merger.”

“We assume that there will be a further gain in consolidated sales for 2004 as a whole and that we will achieve an operating result exceeding last year’s figure of 855 million euros, despite the restructuring in Mayfield and possible impairment losses from our investment in Moscow,” stated Mr Wennemer adding, “for 2005 we anticipate that sales and our operating result will increase further over 2004 levels.”