Q2 results prompt Conti to revise full-year earnings
Reporting its second quarter and first half results, Executive Board chairman Dr. Elmar Degenhart cautioned that the stronger development seen in the second quarter shouldn’t be viewed as a turnaround; rather, sales developed better due to seasonal and technical factors. The European market – where Continental makes 55 per cent of its sales – was described as unstable, and following what the company calls “modest development” in the region’s replacement tyre market in the first half of the year, Continental states its previous estimate for the segment “no longer seems possible.” It now anticipates an “increase of one per cent at best.” The company also said growth in the Asia and NAFTA regions is “also expected to diminish as the year progresses.” As a result, Continental has decreased its full-year forecast from growth of five per cent to four per cent, or “around €34 billion”.
Sales in the second quarter rose 4.3 per cent to €8.54 billion and first half sales increased 0.4 per cent to €16.57 billion. Second quarter EBIDTA was €1.31 billion, up 1.6 per cent year-on-year, while in the first half EBIDTA declined 0.5 per cent to €2.48 billion. Second quarter EBIT rose 2.0 per cent to €883.2 million but for the first half as a whole it was down 1.5 per cent year-on-year to €1.6 billion. EBIT margin dropped 0.3 per cent in the second quarter to 10.3 per cent and decreased 0.2 per cent in the first half to 9.8 per cent (adjusted EBIT margins were 11.5 per cent and 10.8 per cent respectively). Net income rose 34.7 per cent to €700.7 million or €3.50 per share in the second quarter and was up 13.8 per cent to €1.1 billion or €5.71 per share in the first half.
For the full year, Continental continues to anticipate adjusted EBIT margin will remain above ten per cent. It does not foresee a sustainable recovery on the European replacement tyre market, a factor contributing to declining natural and synthetic rubber prices. “Due to our global positioning and the further increase in the number of vehicles equipped with our products, we expect that consolidated sales will show stable year-on-year growth in the third quarter, but no further improvement over the second quarter,” confirmed Degenhart. “The main reason for this is that the passenger car replacement tyre markets are recovering more slowly than expected, especially in Europe. We expect, moreover, that growth on the Asian markets and in NAFTA will level off over the rest of the year. By contrast, there will be positive effects from the downward trend in natural and synthetic rubber prices, chiefly attributable to restrained demand on the tyre markets. We expect this to reduce the burden on the Rubber Group in the order of around €300 million in the current year.”
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