Analysts: Conti profits beat projections

Continental’s fourth quarter adjusted pre-tax profits of 815 million euros (announced yesterday, 1 March) was 5 per cent ahead of the consensus of projections compiled by various financial analysts. At the same time the company’s fourth quarter sales of 7.7 billion were some 2 per cent higher. According to an investor’s note published by Morgan Stanley following the publication of the Continental’s financials, the company’ s margin of 10.3 per cent also came higher than consensus estimates at 10 per cent.

With 491 million euros of free cash flwo reported in 2011, Continental slightly missed its target of greater than 500 million. However, according to the analysts, net debt of 6.77 billion is “a touch better than the street was expecting.” All which is expected to translate into moderated positive share price reactions.

As a consequence of the results, Conti executives raised the firm’s free cash flow target for 2012 from greater than 500 million euros to greater than 600 million euros. At the same time sales guidance was upgraded from a predicted increase of 5 per cent to great than 5 per cent. Nevertheless margin guidance remained static at 10 per cent. 

Looking at the tyre sector specific estimates tells another story. Conti’s passenger car and light truck tyre margins remain strong and stable. The company reported margins of 16 per cent in this area above Morgan Stanley’s prediction of 15.3 per cent. At the same time commercial vehicles tyre sales appear to much stronger than expected, with margins totalling 10 per cent compared with the 4.4 per cent profitability that was anticipated by Morgan Stanley.