HANOVER, Germany (Aug. 2, 2005) — Continental A.G. reported record sales and earnings for the first six months of 2005 despite weakness in certain automotive sectors and continuing losses in its North American passenger and light truck tire business.
The company expects sales and earnings to continue to outpace those in 2004, despite higher raw material procurement costs, Chairman Manfred Wennemer said.
Sales rose 10.6 percent to $8.2 billion million while pre-tax operating earnings rose 28.5 percent to $828.1 million, boosting the earnings/sales ratio nearly 1.5 points to 10.1 percent. The first-time contribution of business from industrial rubber products maker Phoenix A.G.—acquired in the fourth quarter of 2004—accounted for three-fourths of the sales gain, Conti said.
The firm's U.S. passenger and light truck tire operation continues to struggle, as volumes fell on sluggish demand in the region. The unit is not expected to reach its earlier target of breakeven by the fourth quarter, Mr. Wennemer said.
“The deviation from our target figures is not large,” said Allan Hippe, president of Continental Tire North America Inc. and finance director for Continental A.G., “but many factors would have to turn out positively in order for us to just break even. At the same time, this shows we are not in the middle of a catastrophic scenario, but rather that things are just progressing more slowly than expected.”
Sales in passenger car and LT tires rose 8.3 percent to $2.51 billion. Pre-tax operating earnings were up 49.2 percent to $298.2 million.
In commercial vehicle tires, sales fell 8.8 percent to $784.3 million, although before consolidation changes and exchange rate effects, sales increased by 8 percent. A major change in consolidation was the reassignment of Continental Sime Tyre in Malaysia to the passenger/light truck unit.
ContiTech rubber products division's sales rose 49 percent to $1.77 billion, primarily as a result of the Phoenix. Earnings were up 36.6 percent to $157.8 million.