H1 2016 results: Continental lifts full-year EBIT forecast

Germany’s Continental AG reported its financial results for the first half of 2016 this morning and, thanks to what the tyre maker and automotive systems supplier calls “excellent operating performance” within its Rubber Group, has raised its earnings forecast for the current fiscal year.

“We are aiming to achieve an adjusted EBIT margin of over 11 per cent for the year as a whole and thus exceed the previously anticipated margin of around 11 per cent,” commented Dr Elmar Degenhart, chairman of Continental’s Executive Board. The Rubber Group’s adjusted EBIT margin is expected to reach between 16 per cent to more than 17 per cent, while an adjusted EBIT margin of at least 8.5 per cent is forecast for the company’s Automotive Group.

“The very positive unit sales development in our tyre business in the first six months has given us an additional boost,” added Degenhart. Price development for key tyre and rubber product raw materials also contributed to Continental’s positive first-half results, and the company expects overall prices over the year as a whole to be lower than forecast at the end of the first quarter.

Sales rose 1.6 per cent in the second quarter of the year to €10.2 billion, with first half sales up 2.3 per cent year-on-year to €20.0 billion. EBIT increased 5.6 per cent in the second quarter to €1.2 billion, with the margin up from 11.8 per cent a year earlier to 12.3 per cent. EBIT for the first half of the year came to €2.3 billion, a 6.0 per cent improvement on the first half of 2015, and the margin rose from 11.0 per cent to 11.4 per cent. News of a 14.3 per cent rise in net income attributable to the shareholders of the parent in the second quarter, to €904.9 million, must have been music to shareholders’ ears; net income increased 13.1 per cent in the first half of the year and amounted to €1.6 billion.

During the first half of 2016, Continental’s Rubber Group generated sales of €7.9 billion and improved its adjusted EBIT margin by 2.3 percentage points year-on-year to 18.8 per cent. The Automotive Group achieved sales of €12.2 billion and achieved an adjusted EBIT margin of 8.1 per cent.

“As expected, our automotive business picked up momentum in the second quarter,” Degenhart reported. “With organic growth of around five per cent, we grew at a faster rate than the market again in the second quarter. At the same time, we also improved our earnings. Another very pleasing aspect is our order intake, which increased to more than €18 billion lifetime sales in the first half of the year. The Rubber Group continued its positive sales and earnings development. This was thanks in particular to a further rise in sales volumes for tyres and further stabilisation of industrial business.”

Sales volumes for passenger car and light commercial vehicle tyres, both original equipment and aftermarket, rose year-on-year in the first half of 2016 (Continental hasn’t reported exact figures), and sales volumes for commercial vehicle tyres were around eight per cent higher. Tire division sales increased 2.8 per cent year-on-year in the first half of 2016 to €5.2 billion, a growth that equals a 6.2 per cent rise in sales when considering changes in the scope of consolidation and exchange rate effects. EBIT was up 11.1 per cent to €117.3 million, corresponding to 22.6 per cent of sales.

Degenhart commented that the half-year results confirm Continental’s expectations for the current fiscal year: “Over the remainder of the year, we expect the positive sales momentum to continue in line with our outlook for the fiscal year. However, markets are currently expected to remain volatile due to continuing uncertainty, particularly in light of recent political developments.”

After the “gratifying development in the first six months of fiscal 2016,” Continental confirms its sales forecast of approximately €41 billion for the full year, assuming constant currency exchange rates; around €25 billion of this is expected to come from the Automotive Group and more than €16 billion from the Rubber Group. The company is also adhering to its goal of achieving organic growth of four to five per cent in 2016.

Further information about Continental’s 1H 2016 results can be found in the Tyrepress.com company profiles & reports section.