Continental Reports 32% Sales Drop; Achieves “Intermediate Goal”

Continental reported mixed news in its half-year financial results. Sales are down 31.6 per cent to 9.063 billion euros from 13.254 billion in the same period in 2008, but the company’s press release was keen to play up its Adjusted earnings before interest and tax (EBIT) figure of 248.7 million euros, representing an effective return to profitability, albeit with a figure considerably down from 2008’s first half Adjusted EBIT figure of 1.184 billion euros – of course, in the context of the worldwide financial crisis, this drop is less than surprising, and the positives to be gleaned from this years figure are numerous. (“Adjusted” is defined by Continental as the EBIT figure, “before amortization of intangible assets from PPA, changes in the scope of consolidation, and special effects, including severance payments from the worldwide cost-cutting programme in 2009.”)

According to Continental Executive Board chairman, Dr Karl-Thomas Neumann, “The entire Continental team has worked hard in recent months, and the results are becoming more and more obvious. Together, we have achieved an important immediate goal by returning our operations to profitability in a very difficult marketing environment.” Dr Neumann argued that the company’s cost-cutting measures – a restructuring programme he describes as the most “extensive…in the history of Continental” – have been primary in factors leading to signs of the company’s improving financial position. The restructuring and cost-cutting programme has seen the corporation’s total employees figure cut 8,621 since the end of 2008, leaving the number at 130,534.

In terms of the Rubber Group side of Continental’s business, the company showed a vast improvement in its second 2009 quarter to achieve a half-year Adjusted EBIT of 382 million euros, down from 2008’s first half figure of 554.4 million euros. Illustrating this and the progress made in 2009’s second quarter, the Passenger and Light Truck Tires division was able to achieve an Adjusted EBIT of 296.9 million euros, with more than two-thirds of this figure recorded between April and June. The ContiTech division posted an Adjusted EBIT of 98.8 million euros, with 61.4 million made in the second quarter. While the Commercial Vehicle Tires division saw what the corporation describes as “a huge market-driven slump in sales in the second quarter”, its Adjusted EBIT “reached the breakeven point. Sales for the Ruber Group as a whole were down by just over a billion euros, at 3.710 billion from 4.778 in 2008.

Dr Neumann concluded, in his outlook for the corporation, that it remains difficult to forecast for the remainder of 2009, but was willing to share Continental’s expectation of “a continuing revival in sales and operating results in the second half of 2009 compared to the first half.” However, similar wide gaps are predicted for figures comparing 2009 with 2008, due to “the planned plant closures and the announced production adjustments.” According to Dr Neumann, these changes “will result in further restructuring expenses for the corporation in the coming quarters.” Conti will also look into options regarding the repayment or refinancing of part of its credit facility, due in August 2010, “with the goal of substantially improving the capital structure as well,” said Dr Neumann.