Analysts: Conti’s global expansion plans require 930 million euros investment over 3 years
Following the news that has announced plans to build a US$500 million passenger car tyre plant in the South Carolina between now and 2021, financial analysts have added their view on what the manufacturing plans means for the automotive supplier’s profitability.
According to Deutsche Bank, Continental AG is on track to build up passenger car tyre production totalling 125 million units a year worldwide by the end of 2011. The latest plans are seen as part of a global expansion of a further 20 million units by 2015. 40 per cent of these are planned to come from US based production, while the remaining 60 per cent will come from operations based in the emerging markets of China, Russia and Brazil. According to the analysts all this requires the investment of an estimated 930 million euros spread out over the next two to three years.
What’s more they believe that despite the complicated ownership situation Continental has found itself in in recent years and despite other financial analysts going on the record saying the company has limited funds for international development, this is likely to be self financed: “Thanks to a high free cash flow of approximately 700 million per annum, these projects should be entirely self financed. Furthermore, these investments should increase revenues by 1 billion and EBIT by 160/170 million.”
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