Continental: Net income up 2.1% despite higher in raw material costs

Tyre maker and automotive systems supplier Continental AG has reported sales of €11.0 billion in the first quarter of 2017, a 11.7 per cent increase year-on-year. Organic sales growth came to 9.5 per cent. At the same time, net income attributable to the shareholders of the parent rose by 2.1 per cent to €749.6 million, or €3.75 per share. This overall positive bottom line result was achieved in spite of increased raw material prices; Continental also expects to see rising raw material prices in the second quarter of the year.

As at March 31, the company’s operating result (EBIT) had increased by 9.1 per cent year-on-year to over €1.1 billion. This equates to a margin of 10.3 per cent compared with 10.6 per cent in the previous year. The adjusted operating result (adjusted EBIT) climbed to just under €1.2 billion, representing an increase of 7.0 per cent compared with the first quarter of 2016. At 10.7 per cent, the adjusted EBIT margin was 0.4 percentage points lower than the level for the first three months of the previous year. This was mainly due to the sharp increase in raw material prices.

Based on the growth achieved in the first quarter of 2017, Continental has lifted its full-year sales projection to more than €43.5 billion: “We can look back on a strong first quarter in terms of sales and earnings. Our three Automotive divisions in particular made an important contribution to the pleasing sales growth. For the second quarter, we anticipate a continued strong performance. We are therefore raising our sales projection for the current year by €500 million to more than €43.5 billion. At the same time, we are aiming to comfortably achieve an adjusted EBIT margin of 10.5 per cent for the year as a whole,” said Dr. Elmar Degenhart, chairman of Continental’s Executive Board.

Sales within the company’s Rubber Group rose 10.6 per cent year-on-year to €4.3 billion in the first quarter of 2017. Adjusted for changes in the scope of consolidation and exchange rates, the sales increase came to 6.9 per cent. “Strong demand for passenger car and truck tyres and for products from ContiTech’s Mobile Fluid Systems and Benecke Kaliko Group business units resulted in encouraging growth in our Rubber Group in the first quarter of 2017,” shared chief financial officer Wolfgang Schäfer. “At the same time, negative effects from rising raw material prices increased to €100 million as expected. The adjusted operating result therefore decreased to 15.1 per cent. We also expect to see rising raw material costs in the second quarter. However, their impact on earnings should decrease in the second half of 2017 as a result of the price adjustments already introduced.”