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Conti off to 'solid start' in 2014

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(Continental A.G. photo) Continental CEO Elmar Degenhart: “We expect to comfortably achieve an adjusted EBIT (earnings before interest and taxes) margin of more than 10 percent.”

FRANKFURT, Germany (March 6, 2014) — Continental A.G. management expects to report improved operating income in the first quarter on 3- to 4-percent higher sales, CEO Elmar Degenhart told a gathering of business media today in Frankfurt.

The company’s “solid start” so far in 2014 leaves management “confident as regards the outlook for fiscal 2014,” Mr. Degenhart said, noting that Conti expects global demand for consumer and commercial vehicles to rise about 2 percent this year.

Conti’s goal for 2014 is 5-percent sales growth, he said. The company sees “substantial negative” currency exchange rate effects, he added, which could impact sales in the first quarter by up to 4 percentage points, but which should not hurt the firm’s profit margin for the year.

“We expect to comfortably achieve an adjusted EBIT (earnings before interest and taxes) margin of more than 10 percent,” he said.

Mr. Degenhart’s forecasts do not include provisions for the acquisition of Veyance Technologies Inc., which is still undergoing review.

For fiscal 2013, Conti reported net income of more than $2.5 billionon 1.8-percent higher sales of $44 billion, despite negative exchange rate effects of more than $1 billion. The firm’s adjusted EBIT—taking into account depreciation and amortization due to acquisitions and for special effects—rose 3.5 percent to $4.9 billion, or 11.3 percent of sales.

Mr. Degenhart said Conti is proposing paying a dividend of $3.32 per share, or a payout ratio of 26 percent, based on per-share earnings. Conti’s share price rose 82 percent throughout the year, he added.

Since the end of 2012, Conti’s net indebtedness has dropped nearly 19 percnt to $5.7 billion, thereby improving the gearing ratio to 46 percent from roughly 65 percent at year-end 2012. Mr. Degenhart said.

“Although our net indebtedness still exceeds that of our key competitors,” he said, “we are continuing to pursue the goal of a prudent strengthening of our business outside the automotive industry—possibly through additional acquisitions in the non-automotive industrial sector, but also by means of continuous expansion of our replacement tire business.”

In 2013, Conti increased spending for research and development to $7.44 billion, or 5.6 percent of sales, the highest level in company history. Employment rose by 8,000 to 178,000 at year-end.

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