Continental AG posts sales of $17.2 billion

Feb. 23, 2006

Continental AG posted record sales and earnings in 2005, despite "a generally subdued" global automobile market and considerably higher raw material prices.

"We have managed to continue our successful course by combining strengthened innovative power, a successful acquisition policy, sound growth and stringent cost control," said Manfred Wennemer, chairman of Continental's Executive Board, at the company's annual financial press conference. "We will continue to follow this

strategy consistently in the years to come."

Continental recorded consolidated sales of 13.8 billion euros, a 9.8% increase over the previous year. When adjusted for exchange rate effects and effects of the scope of consolidation, the increase is 3.7%, to $17.2 billion.

(In 2004, the company sold its agricultural tire and ContiTech Ages business units and acquired Phoenix AG; in 2005, it sold its Sealing Systems subsidiary and acquired Phoenix Xtra Print.)

The company's operating result (EBIT) increased 30.2% to 1.5 billion euros ($1.87 billion). Return on sales amounted to 10.9%.

The Automotive Systems division increased its sales by 4.5% to 5.2 billion euros ($6.5 billion). Sales increases over 2004 "are primarily due to higher volumes in ESC, brake boosters and brake calipers, as well as electronic control units for driving

authorization systems -- particularly from the higher rate at which vehicles in the U.S. are being equipped," said Dr. Karl-Thomas Neumann, Executive Board member for the Automotive Systems division.

The operating income of the Automotive Systems division rose by 14.3% to 570.1 million euros ($709.4 million).

The Passenger and Light Truck Tires division increased its sales by 8.3% to 4.44 billion euros ($5.3 billion). It also increased its unit sales to 106.2 million tires, a 3.9% increase compared to 2004.

Business in the NAFTA region developed positively overall, according to the company. "All told, in the fourth quarter of 2005 we still almost reached the operating break-even point we were aspiring to," said Dr. Alan Hippe, Continental Tire North America Inc. president and CFO. "We expect that during this year more progress will be achieved and we can stabilize this positive trend.

"More efficient cost structures will help, as will the new plant in Brazil, where production has started."

The Commercial Vehicle Tires division showed a sales decline of 8.1% to 1.4 billion euros ($1.7 billion). Adjusted for changes in the scope of consolidation and exchange rate effects, however, sales increased 6.2%. The division improved its operating result by 47.1% to 153 million euros ($190.4 million).

Global truck tire sales rose 1.7% to 6.7 million units.

In North America, the original equipment business grew by 9.9%, while replacement business declined by 0.9%, according to Dr. Hans-Joachim Nikolin, the Executive Board member responsible for the division.

The Executive Board is proposing to the Supervisory Board that the dividend be increased by 25% to 1 euro ($1.20) per share. The Supervisory Board will decide whether or not to recommend this proposal at the Annual Shareholders' Meeting on May 5.

Continental AG's stock price topped $100 a share ($101.26) for the first time in recent memory on Feb. 21.

"We anticipate continued growth in consolidated sales and further improvement in Group operating result in fiscal 2006," said Wennemer. "In 2006, the subject of acquisitions will continue to top our list. Furthermore, we will expend considerable energies to achieve our challenging growth targets without sacrificing our margins.

"We intend to actively manage containment of anticipated raw material price rises; this will also have to include price increases."