HANNOVER, Germany (May 7, 2013) — Despite reporting lower operating earnings and sales in the quarter ended March 31, Continental A.G. confirmed it expects to record a 5-percent rise in sales and an adjusted pre-tax operating income margin of more than 10 percent for the fiscal year.
Pre-tax operating earnings for the quarter fell 2.9 percent to $1.54 million on 3.4-percent lower sales of $10.6 billion and high research and development expenses, Conti said.
Rubber group pre-tax operating income fell 2.2 percent to $783 million, while revenue slid 6.1 percent to $4.12 billion. As a result, the earnings ratio improved slightly to 15.4 percent, Conti said.
"We're confident that global production of passenger cars will continue to stabilize. We also expect the tire replacement market in Europe to pick up following the unusually long period of cold weather," said Conti Chairman Elmar Degenhart, who characterized business environment in the quarter as "difficult."
In the Rubber Group, a stable price/mix scenario on the sales side helped Conti maintain the previous year's margin level and thereby compensate for the effects of declining sales volumes on earnings, Mr. Degenhart said.
"We are expecting volumes to develop positively in the second half of the year," he said, noting the delayed shift to summer tires from winter tires due to the unusually long European winter will be reflected more positively in the second quarter's results.
The Tire Division reported pre-tax operating earnings of $604.2 million, down 2 percent from 2012, on 6.1-percent lower sales of $2.92 billion.
Conti reported lower sales volumes in the consumer OE and replacement businesses as well as commercial vehicle tires overall. In the consumer OE business, Conti reported volume gains in the Americas and Asia/Pacific, but they weren't enough to offset volume declines in Europe.
Conti increased capital spending in the period more than 10 percent to $567 million, or 5.4 percent of sales. Sixty percent of the capital expenditures went to Rubber Group projects, particularly the expansion of capacity in North and South America and Asia, Conti said.