Continental ups 2011 sales and EBIT forecasts

Continental is raising its outlook for 2011, based on what it called “a very successful first half-year” that included double-digit growth rates for sales and EBIT. “We had previously forecast sales of more than 28.5 billion euros, but we are now expecting at least 29.5 billion euros. We are also targeting an adjusted EBIT margin of around 10 per cent, slightly more than the good 2010 figure of 9.7 per cent,” said Continental executive board chairman Dr. Elmar Degenhart on Friday 29 July on publishing figures for the first half of the year.

He also pointed out that, despite the fact that natural rubber prices are currently declining, raw material expenses for the Rubber Group (which is mainly made up of tyre production) will probably run to 850 million euros in 2011. The main reason for this is the spike in prices for synthetic rubber, due in part to the natural catastrophe in Japan. This is expected to particularly impact the Passenger and Light Truck Tires and ContiTech divisions in the second half of the year.

Year-on-year Continental Corporation sales rose by 17.6 per cent to 14.9 billion euros in the first half-year. At the same time, the automotive supplier achieved an EBIT of just under 1.3 billion euros, which is 270 million euros or 26.7 per cent more than in the same period last year. The EBIT margin is now 8.6 per cent (2010: 8.0%). Adjusted EBIT before amortization and special effects rose to nearly 1.5 billion euros. This represents an increase of 174 million euros or 13.3 per cent and an adjusted EBIT margin of 10 per cent.

Manufacturer raising its creditworthiness

Continental’s chief financial officer Wolfgang Schäfer pointed out that the corporation was able to further reduce its net indebtedness in the first six months of this year. “After the first half-year, we can confirm the goals we set for the current business year with regards to the gearing ratio and have our sights set firmly on 70 per ent, which is our target for the medium term,” Schäfer said. “This is reflected in the recent upgrading of our creditworthiness by Standard & Poor’s rating agency. We are well on our way to satisfying the prerequisites for a rating within the investment grade category on a stand-alone basis by the end of 2012 at the latest. For the current business year, we want to generate free cash flow of more than 500 million euros and reduce our net indebtedness to well below 7 billion euros. The good development in the operating results gives us cause to be optimistic that we will achieve a return on capital employed (ROCE), which is a barometer for economic strength and efficiency, of 15 per cent and thus create additional value.”

Schäfer also pointed out that on 30 June 2011, Continental had liquidity reserves totalling nearly 3.9 billion euros at its disposal.

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