Continental Shares Rebound on Improved Second Quarter Outlook

Shares in automotive supplier Continental AG “jumped” in response to the company upgrading its predictions for second quarter results on 2 July. While the full audited results for the second quarter and first half of 2010 are not due to be released until 29 July, according to first preliminary figures, unaudited sales for the first half of this year increased by about 38 per cent to approximately 12.5 billion euros compared with 9.063.2 million in 2009. On this basis, adjusted EBIT is expected to amount to at least 1.2 billion euros (2009: 248.8 million).

Based upon these preliminary results for the first half year 2010, the company believes that an increase of approximately 15 per cent in consolidated and that the adjusted EBIT margin for 2010 should be between 8 and 8.5 per cent (2009: 5.8%). Continental had previously only forecast between 5-10 per cent top-line growth along with a “significant” increase in adjusted EBIT.

Deutsche Bank analysts welcomed the news explaining that Continental pre-released second quarter revenues of 6.5 billion, which compare favourably with the analysts’ own estimate of 5.8 billion; and an adjusted EBIT of at least 600 million (Deutsche Bank: 540 million euros). The analyst predict that roughly half of the company’s profitability came from the firm’s Rubber Group, which includes tyre sales: “We estimate 320 million euros in Automotive and 310 million euros in Rubber. If confirmed, this would underline that the rubber division achieved a high 13 per cent adjusted EBIT margin, comparable to the first quarter, underlying that the volume effect has fully offset the 60 million raw material price headwind.”

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