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Continental Reaffirms 2008’s 26.4 billion euro Sales Target

Continental AG has published second quarter financial results reaffirming the company’s 2008 sales projections of 26.4 billion euros, despite the “difficult environment.” Conti’s acquisitions mean group first half sales grew to 13.254 billion in comparison with 8.014 billion in 2007. Company management sought to project the most positive side of the story at a time when the German tyre and automotive supplier is battling to defend itself from an increasingly hostile 11.3 billion euro takeover bid initiated by ball bearing manufacturer, Schaeffler Group; and when tyre manufacturers in general are fighting hard to maintain profitability targets.

While Continental announced strong second quarter passenger and light truck sales, the news was not so cheery in the truck tyre department. Here first half sales fell to 685.4 million euros compared with 706.4 million during the same period in 2007. And what’s worse, second quarter operating income (around 30 million euros) came in 36.5 per cent less than expected, down 45.9 per cent year-on-year. This meant, for the second quarter, the company ran at an operating margin of 4.6 per cent. To put this in perspective the car tyre and ContiTech divisions achieved 13 and 12.3 per cent respectively.

31st July 2008/by Tyrepress Editors

Titan Reports Record Sales, Increased Profits in Q2

Titan International has once again reported all time record sales, this time for the second quarter of 2008. In the three months ending June 30, Titan recorded sales of US$269.1 million, 28 per cent higher than the second quarter 2007 sales of $210.3 million. Net sales were also up for the half-year period; sales of $522.6 million reflected a 20 per cent increase on the $436.6 million recorded in the first half of 200. According to Titan, the record sales levels for the second quarter and first half of 2008 can be attributed to exceptionally strong demand in the company’s agricultural market, which reported higher sales of 50 per cent for the second quarter of 2008 and 38 per cent for the first half of 2008 as compared to the respective 2007 periods.

30th July 2008/by Tyrepress Editors

Bafin Approves Schaeffler’s Bid for Continental

The German federal financial supervisory authority (BaFin) has given the go-ahead for Schaeffler Group’s 70.12 euro per share cash bid to take over Continental AG. According to an official statement on the subject, the acceptance period for the offer begins today and ends at midnight on 27 August 2008.

Dr Juergen Geissinger, Schaeffler Group president and CEO, made it clear that Schaeffler wants to wrap up proceedings as soon as possible, pointing to recent comments made by vehicle manufacturers including Volkswagen, GM and Porsche: “Public statements of customers of both companies from the automotive industry show that they view a possible alliance between Schaeffler and Continental as positive…We remain determined to come to a rapid agreement with Continental AG’s management that is in the interests of all parties involved. Regardless of the previous rejection of our offer, we can see a great opportunity for this, because we remain prepared to continue Continental AG’s existing strategy, which we explicitly support, together with the management.”

30th July 2008/by Tyrepress Editors

Michelin Shares Fall Nearly 5% Due to Earnings Worries

Michelin & Cie shares fell 4.8 per cent on July 28 following a published report that the tyremaker’s first-half earnings have failed to meet management targets. Shares fell 2.31 euros to 45.49 euros, furthering the stock’s decline this year to 42 per cent and valuing the company at 6.6 billion euros.

According to a French financial newsletter, Michelin will announce cost-cutting measures at its July 30 earnings presentation, and jobs cuts will also possibly be tabled. Profits have been whittled away by weakening demand for cars in mature markets, which has made it harder to pass on raw material price increases to customers, Some analysts, including London based Adam Jonas from Morgan Stanley, have cautioned that Michelin may find it difficult to implement recently announced price increases.

29th July 2008/by Tyrepress Editors

Car Makers Back Schaeffer’s Conti Bid

This week Porsche and GM executives have added their names to the list of car makers calling for a swift conclusion to merger talks between Continental AG and takeover bidder, Schaeffler Group.

Porsche AG chief financial officer Holger Haerter was the first to come out and join Volkswagen in favour the deal, telling Frankfurter Allgemeine Zeitung he would back Schaeffler Group’s takeover bid. Haerter said the product portfolio of both companies complement each other and set out to allay fears that employees of Continental would face jobs risks as a result of the deal.

29th July 2008/by Tyrepress Editors

Deutsche Bank Walks Away from Schaeffler

Deutsche Bank has severed ties with the Schaeffler Group following the company’s controversial takeover bid for Continental. The bank will provide financial consultation to the German tyre manufacturer, with the vacant position at Schaeffler filled by the Royal Bank of Scotland.

28th July 2008/by Tyrepress Editors

BBS Announces Closure of Former Hayes Lemmerz Plant

The management of BBS International GmbH (‘BBS’) has announced it intends to close its aluminium wheel manufacturing facility in Hoboken, Belgium. BBS management adds the company will follow the relevant legal procedures in doing so, and will attempt to bring about “an acceptable solution for all the parties involved.”

The Hoboken plant, formerly the Belgian subsidiary of Hayes Lemmerz International, was acquired by BBS on 16 June. The factory produces wheels for passenger cars and currently employs 258 people. According to BBS, the operation had been running at a loss for a “considerable time”, and the closure decision has now been taken as “management no longer wanted to keep its staff in a state of uncertainty.”

25th July 2008/by Tyrepress Editors

MRF Profits Down in Q3 Despite Increased Sales

Increasing raw material and personnel costs are said to be two of the key factors behind lower net profits for India’s MRF in the financial year’s third quarter. In the three months to June 30, 2008 the Chennai based company experienced a 25 per cent drop in net profits from the corresponding quarter a year earlier, to Rs 318.6 million (£3.74 million). Net profits for the nine months of the current financial year stand at Rs 1.492 billion (£17.5 million), an increase of 39.2 per cent.

25th July 2008/by Tyrepress Editors

Goodyear Appoints New Internal Audit VP

Goodyear has announced the appointment of Richard Pegher to the position of vice president of internal audit. Pegher’s appointment, effective August 1, sees him reporting functionally to the audit committee of the company’s Board of Directors and administratively to executive vice president and CFO Mark Schmitz. In this role, based at the company’s Akron, Ohio headquarters, Pegher will implement audit programs and evaluate risk exposures relating to the company’s governance, operations, financial reporting and information systems.

24th July 2008/by Tyrepress Editors

Conti: Schaeffler Takeover is ‘Desirable’

Schaeffler Group’s so-called “sneaking takeover” of Continental AG now appears to be unstoppable, following the supervisory and executive boards’ decision that an agreement with Schaeffler is “desirable.” The supervisory board has consented for the executive board to enter into direct negotiations with Schaeffler for either a better premium for Continental shareholders or to persuade it to limit its stake. Both boards agreed, after intensive deliberation, that Schaeffler’s revised 11.3 billion euro offer does not value the company sufficiently highly “and fails to reflect the best interest of the company.” In response Schaeffler cautiously welcomed Continental’s decision: “The Schaeffler Group welcomes that the management and supervisory boards of Continental AG are of the opinion that an agreement with Schaeffler Group is desirable…[and]…is now waiting for Continental AG to substantiate their expectations.”

What really rattled Continental about Schaeffler’s original offer, which was the lowest it legally could have been under German law (market regulator Bafin up it from 11.2 to 11.3 billion so it would match its minimum calculation), was that it does not take tax disadvantages and increased re-financing costs triggered by such a bid into account. This is something that is particularly significant in Hannover because Conti is one of the most high leveraged tyre businesses around. And if that isn’t enough Schaeffler’s takeover will trigger a renegotiation of the terms of the 13.5 billion euro loan Conti took out to buy Siemens VDO. When you take the credit crunch into account, it will be difficult for Conti to secure the same terms it did then.

24th July 2008/by Tyrepress Editors

Board Member: 90-100 euros ‘Appropriate’ Continental Price Tag

Financial Times Deutschland is reporting that an unidentified Continental AG supervisory board member said a takeover offer of between 90 and 100 euros per share would be more appropriate, than Schaeffler Group’s current 70.12 euros bid. The report also suggested that a foreign investor could be about to launch a counter-bid for Continental, making Schaeffler’s all German takeover bid appear more acceptable.

However market analysts are casting doubt over this theory: “I wouldn’t know of any industrial company that could make a counter-bid,” said Stephan Thomas, a fund manager at Frankfurt Trust Investment GmbH in Frankfurt. “Given the current credit- market turmoil, it’s unlikely that private equity companies will do so,” he told Bloomberg.

24th July 2008/by Tyrepress Editors

Schaeffler Raises Conti Bid to 11.3 billion euros

Schaeffler Group has increased its bid for Continental AG to 11.3 billion (70.12 euros per share), compared with its previous bid of 11.2 billion euros (69.37 euros per share). The move brings the company’s offer in line with Continental’s average three-month share price as determined by German market regulator, Bafin. Following its investigation into Schaeffler’s so-called “creeping bid,” Bafin has reportedly decided against holding up the takeover.

Meanwhile, Conti’s defensive strategy has begun to play out, with chief executive Manfred Wennemer receiving the backing of some of the company’s largest shareholders. One German institutional investor with more than 1 per cent of the Conti told the Financial Times: “An offer must note Conti’s long-term value and include a control premium,” adding that the bidder would have to offer 100 euros a share.

22nd July 2008/by Tyrepress Editors

Morgan Stanley ‘Double Downgrades’ Michelin

Financial analysts at Morgan Stanley have downgraded Michelin stock to “underweight” and predicted Michelin will make a profit warning when it announces its first half 2008 results on 30 July. “We are double-downgrading Michelin…This year’s sharp rise in raw material costs may be the immediate source of pressure on earnings, but we think the bigger risk going forward is slowing OE and replacement demand,” the analysts explained. Describing the premium tyre manufacturers’ pricing discipline as “remarkable,” the bank predicted pre-tax (EBIT) profit margins would still fall to 7.3 per cent, near the company’s historical average, in 2008.

Explaining the reason for their rating downgrade, the Morgan Stanley analysts suggested Michelin’s truck and speciality tyre segment strengths could be weakness in a tough market for vehicle makers: “With 50 per cent of [Michelin’s] revenues coming from truck and speciality tyres, Michelin’s fortunes are tied to the industrial cycle more than any other tyre company we cover globally.” In addition, according to the report, around 30 per cent of revenue and 20 per cent of Michelin’s profits are said to be generated in North America where recent tyre demand has been particularly weak.

22nd July 2008/by Tyrepress Editors

Pirelli Seek Consolidation in Turkish Buyout

Pirelli has begun to negotiate the buying out of minority shareholders in its Turkish units Turk Pirelli Lastikleri – which supplies commercial and passenger car tyres – and Celikord, a steel cord manufacturer. The Italian tyre giant owns 69 per cent and 51 per cent of the companies respectively and is looking to consolidate in the growing, strategically-important Turkish market through full ownership. Pirelli has been present within the nation for 50 years.

Financial news sources report that Pirelli is yet to release a statement on the matter, or of any details of the performance of the firms subject to buyout bids.

18th July 2008/by Tyrepress Editors

Schaeffler Likely to Take Control of Continental AG in 2010

Schaeffler Group is likely to wait until 2010 before it takes full control of Continental AG, German radio station NDR1 reported on 16 July. The report, which didn’t cite any sources, suggests that Schaeffler will wait until the lion’s share of the loan arrangement Conti racked up to finance the Siemens VDO acquisition expires. According to the report, this would also mean Schaeffler would have to re-negotiate conditions before the loans expire, and in the current conditions would not get such a good deal.

The German radio report was aired the same day that financial analysts at MorganStanley published an investor note suggesting “a takeover bid meant to fail could push the share price higher for the next 30 days.” The MorganStanley analysts point out that, in their opinion, a full takeover of Conti does not appear “financially feasible.” However, the takeover bid should clearly add strong support to the share price in the short term, the analysts conclude.

17th July 2008/by Tyrepress Editors