HANOVER, Germany (Aug. 1, 2013) — Continental A.G. reported slightly lower operating earnings and sales in the six months ended June 30, but management is sticking with its earlier forecasts for the full year of an adjusted pre-tax operating margin of more than 10 percent on slightly higher sales.
Conti's tire business unit reported similar results—pre-tax operating income down 0.7 percent and sales off 1.6 percent—although the figures show business picked up in the second quarter, rising 2.9 percent, and operating income improved slightly.
For the half year, Conti's tire business reported operating earnings of $1.37 billion on sales of $6.39 billion, for a 21.4-percent operating ratio. Conti reported passenger and light truck tire OE sales were up over 2012, especially in Asia/Pacific and the Americas, while replacement market sales fell short of last year's levels.
Commercial vehicle tire sales grew about 2 percent during the period, Conti said.
For the second quarter, the tire business reported a 2.9-percent sales gain to $3.33 billion, while earnings plateaued at $734.4 million.
Corporate-wide, Conti reported pre-tax operating income of $2.2 billion on sales of $21.7 billion. Net income rose 13.8 percent to $1.44 billion, with the non-recurring positive effect of a recognition of deferred tax assets in the U.S. a "contributing factor" to the gain.
"Having gotten off to a difficult start in the current year, the company saw stronger development—as anticipated—in the second quarter, particularly in Europe," said Executive Board Chairman Elmar Degenhart. "This should not, however, be viewed as a turnaround."
Due to Conti's global positioning and the continued increase in the number of vehicles equipped with Conti products, the company expects consolidated sales will be stable in the third quarter, Mr. Degenhart said, but with no further improvement over the second quarter.
A main reason for this is the slower-than-expected recovery of passenger car replacement tire sales, especially in Europe, he added.
"We expect, moreover, that growth on the Asian markets and in NAFTA will level off over the rest of the year," Mr. Degenhart said.
By contrast, he added, Conti is expecting positive effects from the downward trend in natural and synthetic rubber prices, chiefly attributable to restrained demand on the tire markets.This could result in an earnings benefit on the rubber group of $400 milllion or more in the current year, he said.
Despite the lackluster sales performance, Conti continues to invest in its infrastructure and research and development, boosting spending in these areas by 4.4 and 9.7 percent, respectively, in the six-month period.
"Our expenditure for research and development and our capital expenditure…show that—particularly in the face of a challenging economic environment—we are continuing to strengthen the company's ability to meet future needs," Mr. Degenhart said.