Continental AG reported increases in net sales and net income for the first half of 2016, along with 8% volume growth in passenger and light truck tires, as well as commercial truck tires.
For the six months ended June 30, 2016, Continental recorded 20 billion euros in net sales and 1.6 million euros in net income. Sales are up 2.3% from the same period in 2015 (19.6 billion euros) and net income is up 13.1% (1.4 million euros).
Using the average exchange rate from the last day of the period, Continental reported $22.3 billion in net sales and $ 1.8 million in net income. The company’s income-to-sales ratio was 8.2%.
In the company’s rubber group, sales for the first half of 2016 were up 2.4%, 7.9 billion euros compared to 7.7 billion euros in 2015. Tire sales were 5.2 million euros, up 2.8% from the 5.1 million euros from the first half of 2015.
Continental expects the replacement consumer tire market to increase by 2% worldwide in 2016, with anticipated growth in Europe (2%), NAFTA (2%) and Asia regions (5%), offset by a 5% drop in South America.
The company’s outlook for the replacement commercial tire market is similar, with a global increase of 2% — and that’s up from the 1% increase that was previously forecast. Continental reported regional commercial truck tire increases in Europe (3%), NAFTA (2%), and Asia (2%), offset by a 5% drop in South America.
In its half-year report, Continental highlighted its investment of 50 million euros in its farm tire business. The company is expanding its Lousado, Portugal tire plant, and expects production of farm tires there to begin in 2017. The company also is spending 2.5 million euros in a new research and development center “to accelerate the growth of the agricultural tires portfolio,” the company said.
Outlook
Continental is raising its earnings forecast for the fiscal year — because of its tire sales.
Chairman Elmar Degenhart said, “We are aiming to achieve an adjusted EBIT margin of over 11% for the year as a whole and thus exceed the previously anticipated margin of around 11 percent.”
The reason for the increase is the rubber group’s excellent operating performance, he said. “The very positive unit sales development in our tire business in the first six months has given us an additional boost.”
The company’s development also is being helped by the trend in the prices of key raw materials for the production of tires and other rubber products. Over the year as a whole, the price increases are currently expected to be lower overall than forecasted at the end of the first quarter of 2016.
In Degenhart’s view, the half-year results confirm the expectations for the current fiscal year. “Over the remainder of the year, we expect the positive sales momentum to continue in line with our outlook for the fiscal year. However, markets are currently expected to remain volatile due to continuing uncertainty, particularly in light of recent political developments.”
