Continental AG Posts Half-Year Profit

Based upon preliminary figures for the second quarter of 2009, Continental AG is reporting a “clear profit” for the three-month period, with an adjusted EBIT of 283.0 million euros. Reported EBIT for the quarter was 38.8 million euros, compared with a loss of 34.3 million in the first quarter. These results, says Continental, demonstrate the company’s “unwavering operational strength in the midst of the ongoing crisis in the automotive sector.”

“In an extremely difficult business environment and despite the current paralysis due to its uncertain future, Continental still achieved its operating goals,” said Continental Executive Board chairman Dr. Karl-Thomas Neumann on July 20. “The most extensive cost-cutting package in the company’s history, the management of accounts receivable from GM and Chrysler as well as the rigorous and consistent adaptation of the company to the continuing very difficult market environment in our business fields are showing increasing positive results.” Neumann also pointed out that Continental has reduced its global workforce by about 16,000 since the crisis began in September 2008.

“But despite a slight market upturn, for the time being there is no reason to give the all clear,” he added. “In the second half of 2009 and beyond, the business environment will continue to be a major challenge for Continental as well as for the entire supplier industry. It would therefore be shortsighted, in view of our tight financial situation, to rely solely on our operational strength, especially since the improved operating margins are generated based upon much lower sales.”

Based on preliminary figures, consolidated sales for the first half of 2009 fell compared with the same period of the previous year to 9,063.2 million euros, a drop of 31.6 per cent. This decline, according to Continental, was due to the market downturn resulting in part from the unexpected full stop in production at Chrysler in May and June. Sales in the second quarter of 2009 amounted to 4,761.2 million euros, down from 6,614.6 million last year. Consolidated EBIT fell in the first half of 2009 to -126.2 million euros, (from 912.4 million in the first half of 2008), EBIT in the second quarter totalled 38.8 million euros despite the continuing slump in sales, exceeding first quarter EBIT by more than 200 million euros.

“The key figures for the second quarter once again clearly demonstrate that Continental’s organisation is well balanced and makes strategic sense: The Rubber Group, which is less susceptible to economic trends on the whole, is posting substantial profits, providing for reliable cash flow,” said Dr. Neumann. “At the same time, we have gained important business for the future in the Automotive Group. In view of the upcoming financial liabilities that become due in August 2009 and August 2010, we feel that it is still vital for us to safeguard this strong formation with an appropriate financing situation in the medium and long term.”

In a letter to the company’s employees, Dr. Neumann and his Executive Board colleagues thanked them for their hard work and commitment under extremely difficult conditions and especially for the understanding of those employees who were affected by the postponement of the June remuneration payments by a few days in some countries. “We initiated these precautionary measures at a point in time when we were not absolutely certain that we would comply with the covenants without this step. As it turned out, we would have managed this without postponing the remuneration payments. All the more reason for us to thank you for your understanding of this unusual procedure,” the letter stated.

The Continental Corporation’s financial report for the first half-year will be released on July 30. Dr. Neumann also emphasised that the Continental Executive Board will be presenting various future scenarios to the Supervisory Board on July 30: “We still assume that clear direction-setting decisions regarding the future of Continental will be made at the upcoming meeting of the Supervisory Board.”