Continental boasts record sales and earnings (again)

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Continental AG recorded record net income of one billion euros on record consolidated sales of 14.9 billion euros for its 2006 fiscal year ended Dec. 31, 2006. That compares to net income of 952.2 million euros on sales of 13.8 billion euros for the same period in 2005.

(Based on the exchange rate as of Friday, Dec. 29, 2006, Continental posted net income of $1.3 billion on net sales of $19.6 billion.)

It is the fifth time in a row that the company has outperformed the prior year's figures for sales and earnings.

While net income increased 5.5% and sales 7.6%, the company's consolidated operating income rose 6.3%, from 1.5 billion euros to 1.6 billion euros.

"We kept our word, and we want to keep up our impressive track record this year as well," said Continental Executive Board Chairman Manfred Wennemer on Thursday at a Continental press conference in Frankfurt, Germany.

He pointed out that in a period of 10 years, the company has almost tripled sales while increasing the operating result fivefold. "So our long-term strategy is paying off."

Preliminary results per division

* Passenger and Light Truck Tires: lifted its sales to 4.7 billion euros, up 5.6% compared with 2005. The division reported a 2.7% decline in its EBIT to 650.9 million euros, generating a return on sales of 13.9%.

"In view of various negative impacts, particularly the 169 million euro increase in raw material costs, we have done a really good job, also in comparison with our competitors," said Wennemer, who is also responsible for the division. With 106.3 million tires sold, sales volume was slightly higher than in 2005.

"We markedly improved the adjusted EBIT in the NAFTA region despite the extremely adverse conditions and recorded a significant profit in the replacement business for the second year in a row. The extent of further improvement in the passenger and light truck tires business in the NAFTA region depends primarily on the trend in raw material costs."

* Commercial Vehicle Tires: Sales rose to nearly 1.5 billion euros, up 6.5% compared with 2005. The division reported an 11% decline in its EBIT to 136.2 million euros, generating a return on sales of 9.3%. Worldwide unit sales of 6.9 million tires were 4.2% greater than the previous year.

"We have prepared for further growth with additional capacity at low-cost locations in Slovakia, Brazil and Malaysia," said Executive Board Member and division head Dr. Hans-Joachim Nikolin.

* ContiTech: The division recorded a decrease in sales to 2.87 billion euros, down 0.9% compared with 2005. It improved its EBIT by 98.6%, however, and achieved a return on sales of 11.1%.

* Automotive Systems: Continental's largest division, which accounted for 40% of overall sales, posted sales of nearly six billion euros, up 14.6% compared with 2005.

Outlook for 2007

"Consolidated sales for fiscal 2007 will grow as a result of the full consolidation of the business operations acquired from Motorola," said Wennemer. "Organic growth of at least 5% is expected as well.

"At the same time, we anticipate a further improvement in our absolute consolidated operating result, with positive effects coming from the current easing of raw material prices, the latter still being, however, at a very high level.

"We will initiate additional activities to achieve a more efficient balance sheet structure in 2007 as well," he said. "Such activities could include acquisitions, organic growth as well as a higher, shareholder-return orientated dividend in the future. Share buy-backs are considered unlikely."

Continental AG's stock price on the Frankfurt Stock Exchange closed at $129.61 a share on Thursday, Feb. 22. The Executive Board will propose to a 2 euro dividend per share – double the previous dividend -- to the Supervisory Board at Continental’s Annual Shareholders' Meeting on April 24.

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