Continental to Increase Investment

In 2005 Continental’s capital expenditure increased by 20 per cent and should increase by a further 7 per cent to 910 million euros (6.3 per cent of sales). Over the last three years (2002 – 2004) Continental’s capital expenditure (capex) reached 5.5 per cent of sales, approximately 650 million euros per annum, according to Deutsche Bank analysts.

This compares with Michelin’s net capex of 1.22 billion (7.8 per cent of sales). “Therefore, with the same level of Net Profit, Michelin’s free cash flow is 200 million euros lower. This situation should reverse in 2008 when Michelin’s Capex linked to the attrition of their workforce (an estimated 300 million euros) will disappear,” the analysts added.