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Continental's NAFTA tire sales rebound

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Continental Corp.’s tire sales are up for the first half of 2015, and to help strengthen its supply chain the company is planning to nearly triple the capacity of its passenger and light truck tire plant in Hefei, China.

The current capacity of five million tires per year will increase to 14 million tires by 2019. The expansion is even greater than what Continental had forecasted when it opened the plant in 2011. Then, it said the capacity could grow to 10 million units a year.

In its financial report for the first half of 2015, the importance of the Chinese tire market is clear, as Continental referred to it as “the most important market.”

“In Asia, there was a further increase in demand for replacement tires for passenger cars and light commercial vehicles in the reporting period,” the company said. “Preliminary data indicate that sales volumes in China – the most important market – climbed by 8% in the second quarter of 2015 after growth of 5% in the first quarter.”

Overall, the company’s tire sales were up in both the second quarter, and for the entire first half of 2015 compared to 2014.

For the quarter, tire sales were 2.6 billion euros, up from 2.4 billion euros the year prior. For the first half, tire sales were just shy of 5.1 billion euros, up from 4.7 billion euros for the first six months of the previous year.

Continental says its NAFTA passenger and light truck replacement tire sales normalized in the second quarter as Chinese imports were partly replaced by imports from Thailand and Indonesia. That’s an improvement after first quarter sales, which fell by 6% compared to the same period in 2014.

“Due to this development, we are raising our forecast for the year as a whole from -2% back to +1%,” the company said.

Globally, the company is maintaining its overall forecast for 2015 consumer replacement tire sales: growth of almost 3%.

Original equipment tire sales were up overall for the first half of the year. Sales volumes in Europe, Middle East and Africa region were lower than a year ago, while OE sales in the Americas were up. Commercial tire OE business matched that of the previous year.

As for medium and heavy truck replacement tires in the NAFTA region, sales were up 5% for the first half of 2015. The company expects the region’s growth to be around 3% for the full year.

For the Continental company as a whole in the first half of 2015, the 19.6 billion euros in sales were up 15.8%, and net income of 1.4 billion euros was up 11.1%. The company’s income-to-sales ratio is 7.4% for the first half of the year, and 7.9% for the second quarter.

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