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Continental AG expects higher sales and earnings in 2006

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After the first nine months of 2006, Continental AG has confirmed its rosy outlook for the year as a whole despite high raw material prices.

"We have done well in a tough environment, and as announced, our sales and EBIT (earnings before interest and taxes) will exceed the record levels of 2005," said Executive Board Chairman Manfred Wennemer today (Nov. 1) in Hanover, Germany.

At its interim report presentation, Wennemer stressed that the company had raised its adjusted EBIT by 10.1% to 1,183.2 million euros after nine months compared with the same period of 2005.

"In our industry, it does not really make much sense to look at the quarterly figures. Nevertheless, the third quarter 2006 again shows that, with an adjusted EBIT of 410.3 million euros, we are nearly on par with the adjusted figures for the same period of 2005.

"In view of the costs for raw materials, which reached a temporary peak this quarter, and the production cutbacks of key customers in the U.S.A., we feel this is remarkable, since a year ago we achieved our best ever quarterly result."

Consolidated sales for the first nine months of 2006 rose by 6.9% compared with the same period of the previous year to 10,945.3 million euros (previous year: 10,240.9 million euros).

EBIT fell by 1.8% to 1,116.1 million euros (previous year: 1,136.0 million euros), and the return on sales to 10.2% (previous year: 11.1%).

The increased raw material prices reduced EBIT in the first nine months by approximately 232 million euros compared with the prices for the first nine months of 2005, the company reported.

Continental CFO Dr. Alan Hippe referred to adjusted figures in his assessment of the operational development: "Changes in consolidation and one-time effects increased the results for the first three quarters of 2005 on the whole by 61.7 million euros, compared with negative effects amounting to 67.1 million euros in the first nine months of this year.

"Adjusted for these effects, we achieved an EBIT of 1,074.3 million euros for the first nine months of 2005, and an EBIT of 1,183.2 million euros for the first nine months of this year.

"So, taking these figures into account, in the first three quarters of this year we outperformed the same period of 2005 by 108.9 million euros. If we just look at the third quarter of 2005, we had positive effects totaling 36.1 million euros resulting from changes in consolidation and one-time effects. In contrast, we had negative effects of 16.2 million euros in the third quarter of this year.

"Adjusted for these effects, there was an EBIT of 414.2 million euros in the third quarter of 2005, and 410.3 million euros in the third quarter of 2006."

The Passenger and Light Truck Tires division increased its sales in the first nine months of 2006 to 3,392.8 million euros, up 5.5% compared with the same period last year (3,215.6 million euros).

Before exchange rate effects, sales rose by 4.6%. Sales to the NAFTA replacement market improved markedly, leading to an increased EBIT before one-time effects. One-time effects led to a 32.4% decline in EBIT to 325.0 million euros (previous year: 480.8 million euros) and a return on sales of 9.6% (previous year: 15%) for the division. Before these one-time effects, EBIT improved by 8.8 million euros or 2.2%. This was achieved despite price increases for raw materials, the company noted.

The Commercial Vehicle Tires division reported sales in the first nine months of 2006 of 1,087.5 million euros, an increase of 7.8% compared with the same period of 2005 (1,008.8 million euros). Before changes in the scope of consolidation and exchange rate effects, sales were up 9%. The division reported a 23.8% decline in EBIT to 86.6 million euros (previous year: 113.7 million euros), mainly due to increases in raw material prices. Before changes in the scope of consolidation and one-time effects, EBIT fell by 9.6 million euros or 12.4%.

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