Continental Raises Sales and EBIT Forecast for Current Fiscal Year
(lifePR) (Hannover, ).
- Automotive supplier expects sales of at least €29.5 billion in 2011
- Adjusted EBIT margin of around 10% now targeted
- Raw materials expenses of €850 million anticipated in the Rubber Group
- Sales grow to €14.9 billion in the first half-year, net income up 96% to €683 million
- Net indebtedness reduced to €7.1 billion
The international automotive supplier Continental is raising its outlook for the current business year, based upon a very successful first half-year with double-digit growth rates for sales and EBIT. "We had previously forecast sales of more than
€28.5 billion, but we are now expecting at least €29.5 billion. We are also targeting an adjusted EBIT margin of around 10%, slightly more than the good 2010 figure of 9.7%," said Continental Executive Board chairman Dr. Elmar Degenhart on Friday upon publication of the figures for the first half of the year, adding: "At present, we do not see any reason why the good development in earnings should be weaker in the second half of 2011 than in the first half."
He also pointed out that, despite the fact that prices of natural rubber are in the meantime declining somewhat, raw material expenses for the Rubber Group in 2011 will probably run at €850 million. The main reason for this is the spike in prices for synthetic rubber, due in part to the natural catastrophe in Japan. This development will impact in particular the Passenger and Light Truck Tires and ContiTech divisions in the second half of the year.
Year-on-year, the Continental Corporation raised its sales in the first half-year by 17.6% to €14.9 billion. At the same time, the automotive suppliers achieved an EBIT of just under
€1.3 billion, which is €270 million or 26.7% more than in the same period last year. The EBIT margin is 8.6% after 8.0% in 2010. Adjusted EBIT before amortization and special effects rose to nearly €1.5 billion. This represents an increase of €174 million or 13.3% and an adjusted EBIT margin of 10%.
In the first six months of this year, net income attributable to the shareholders of the parent was up 96% to €683 million. Earnings per share increased to €3.42 from €1.74 in the same period of 2010. After the first six months, Continental had a total workforce of 159,116 employees, or 10,888 more than at the end of 2010.
Continental's chief financial officer Wolfgang Schäfer pointed out that the Continental Corporation was able to further reduce its net indebtedness in the first six months of this year. "After the first half-year, we can confirm the goals we set for the current business year with regards to the gearing ratio and have our sights set firmly on 70%, which is our target for the medium term," Schäfer said. "This is reflected in the recent upgrading of our creditworthiness by Standard & Poor's rating agency. We are well on our way to satisfying the prerequisites for a rating within the investment grade category on a stand-alone basis by the end of 2012 at the latest. For the current business year, we want to generate free cash flow of more than €500 million and reduce our net indebtedness to well below €7 billion. The good development in the operating results gives us cause to be optimistic that we will achieve a return on capital employed (ROCE), which is a barometer for economic strength and efficiency, of 15% and thus create additional value."
Schäfer also pointed out that on June 30, 2011, Continental had at its disposal liquidity reserves totaling nearly €3.9 billion, consisting of cash and cash equivalents of almost
€1.6 billion as well as unused committed lines of credit totaling some €2.3 billion.
The Automotive Group as well as the Rubber Group made a positive contribution to the growth in sales and earnings. Year-on-year, the Automotive Group upped its sales in the first half-year by 15% to approximately €9.1 billion. An EBIT of €503 million was reported after €361 million in 2010. With growth of 21%, the Rubber Group achieved sales of €5.8 billion and reported an EBIT of €797 million compared to €691 million in the prior year, despite raw material expenses totaling €532 million in the first six months.
"In view of the additional opportunities for sales, we increased the capital expenditure ratio already in the first half of the year," said Degenhart, adding: "As already announced in the first quarter, we will invest up to 1.8 billion in all divisions in the year as a whole, thus creating the basic conditions necessary for us to stay at the forefront."
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