Conti confirms 2013 guidance after weaker Q1

Although admitting that difficulties were encountered in the first quarter of 2013, Continental says it “held its ground” during this period and has confirmed its guidance for the full year.

“As anticipated, the first three months of this year were difficult,” stated Continental CEO Dr. Elmar Degenhart upon the 3 May release of the company’s first quarter results. “However, our business has already regained momentum. We’re confident that global production of passenger cars will continue to stabilise. We also expect the tyre replacement markets in Europe to pick up following the unusually long period of cold weather.”

The tyre and automotive component manufacturer made sales of 8.0 billion euros in the first quarter, 3.4 per cent lower than the record result achieved a year earlier. In reporting this slightly lower result, Continental noted that the January to March period had three less working days this year due to last year’s leap year and the early Easter holiday in 2013. “In many countries, this had a negative impact on the development of passenger car production and tyre sales volumes,” wrote the company in its quarterly results statement. “Furthermore, the unusually long period of cold weather affecting large parts of Northern Europe meant that drivers changed over to summer tyres later than usual.”

From this total, Continental’s Rubber Group generated sales of 3.1 billion euros in the first quarter. The adjusted margin improved to 15.4 per cent, after 15.2 per cent the previous year. “In the Rubber Group, the stable price/mix development on the sales side helped us to keep the previous year’s good margin level at a high level and thereby compensate for the effects of declining sales volumes on earnings,” shared Degenhart. “We are expecting volumes to develop positively in the second half of the year. The delayed shift from winter to summer tyres due to the unusually long winter is, moreover, likely to be reflected positively in the second quarter.”

Total operating result, or EBIT, decreased 5.1 per cent to 747 million euros in the first three months of the year. Continental attributes this lower figure in part to “persistently high research and development expenses, which climbed to 8.7 per cent of sales in the Automotive Group.” The EBIT margin was 9.3 per cent, dipping slightly from 9.5 per cent in the same period of the previous year. Adjusted consolidated operating result (adjusted EBIT) amounted to 796 million euros, representing a decline of around 93 million euros or 10.4 per cent against the first three months of 2012. At 10 per cent, the adjusted EBIT margin was still double-digit, but down on the 10.7 per cent achieved in the very strong prior-year period.

Net income attributable to the shareholders of the parent fell 8.6 per cent to 441 million euros in the first three months. Earnings per share thus amounted to 2.21 euros in the first quarter after 2.41 euros in Q1, 2012.

Despite a weaker first quarter, Continental’s outlook for the year has not been downwardly revised. Looking ahead to full-year 2013, Degenhart commented that Continental still anticipates “a rise in sales of around five per cent to more than 34 billion euros and an adjusted EBIT margin of over ten per cent, particularly since we have already hit these targets in the first quarter despite all the adverse circumstances.”

Net indebtedness down to 5.6b euros