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September 04, 1995 02:00 AM

CONTI PRE-TAX PROFITS UP, SALES RISE FOR HALF: CGT SALES GROW 14.5%

Bruce Davis
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    HANOVER, Germany-Expanded sales volume, increased selling prices and cost- saving programs helped Continental A.G. offset rising raw materials costs and unfavorable currency exchange effects and post a 53-percent increase in pre-tax earnings and a 4.6-percent sales gain in the first six months of 1995. For the first half year, the Hanover-based company posted pretax earnings of $41 million on sales of $3.59 billion.

    Meanwhile, its U.S. tire making unit, Continental General Tire (CGT) Inc., which accounts for about a fifth of Conti's sales, saw sales growth in the passenger and truck tire segments and a boost in its original equipment business. First-half sales for CGT were estimated at $764 million.

    Despite the improvements, Conti management is sticking by its earlier, conservative forecast for this year-a 3-percent rise in turnover and a slight improvement in earnings, providing overdue price increases can be carried out in the coming months.

    ``Projecting forward the half-year result for the full year is not possible because of the `imponderables' in the marketplace,'' Conti's management board wrote in a letter to shareholders.

    Above all else, the upward spiral of raw materials costs-the value of purchases for the six months is 25 percent higher than in 1994-is cause for caution, the letter explained.

    The unfavorable dollar/deutschmark rate was reflected in CGT's results-sales up 14.5 percent in dollar terms, but down 2.6 percent from a year-ago when expressed in deutschmarks.

    CGT reported 9- and 18-percent increases in unit sales of passenger car and truck tires, respectively; business with OE customers in both product categories was up. The company also reported securing a contract to supply its latest AmeriÞG4S tire for Ford Motor Co.'s Taurus/Mercury Sable.

    Work on CGT's new headquarters in Charlotte, N.C., is proceeding on schedule for passenger car division personnel to move in by year's end, Conti said. Truck tire personnel will follow during 1996.

    In Europe, sales of passenger and commercial vehicle tires jumped 5.8 and 14.3 percent, respectively, with OE deliveries to truck makers especially lively. The car tire sales increase, on the other hand, resulted primarily from higher unit sales of performance tires both to OE customers and in the aftermarket, Conti said.

    As of July 1, Continental A.G. re-issued its common stock at an effective 10-for-1 split. While the stock initially jumped in value on a comparative basis, after three weeks it had returned to an equivalent level as before the split, closing Aug. 1 at $16.56 per share.

    Conti's non-tire products division, ContiTech Holding, increased sales 17 percent during the period, although part of this increase was due to internal restructuring. Meanwhile, ContiTech also expanded on several fronts during the period. In March, it entered an agreement with Cooper Tire & Rubber Co. for the design, manufacture and marketing of a variety of non-tire automotive components in Europe and North America.

    ContiTech also bought TBA Belting Ltd.'s power transmission belting business in Wigan, U.K., established ContiTech-INA GmbH, a joint venture for designing and supplying power transmission systems to automotive customers, and founded Syrma A.E., for the production of steel cord for conveyor belting, in Volos, Greece.

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