Conti books double-digit profit gains

HANNOVER, Germany (May 7, 2014) — Continental A.G. reported double-digit gains in operating and net income for the quarter ended March 31 on 4.4-percent better sales.

Pre-tax operating income rose 21 percent to $1.25 billion on sales of $11.6 billion, yielding an operating ratio of 10.8 percent, up 1.5 percentage points from 2013. Net income jumped 33.3 percent to $813.3 million, Conti reported.

“In the opening months of the year, we once again demonstrated that we are very capable of combining our growth with value creation,” said Continental CEO Elmar Degenhart. “We intend to continue along our current path in the coming months, too.”

For fiscal 2014, Continental is projecting higher operating income, in part due to falling natural rubber (NR) prices. The company now forecasts an adjusted EBIT margin of 10.5 percent—up a half percentage point from earlier projections—based in part on about $110 million in estimated cost savings from NR purchases.

For the quarter, Conti's tire businesses reported pre-tax operating income (EBITDA) of $753.8 million, a gain of 18.8 percent, on 4.3-percent higher sales of $3.21 billion.

Conti said the revenue gain was based on higher sales volumes in both OE and replacement markets, with particularly strong growth in the Americas and Europe/Middle East/Africa. The commercial vehicle tire business booked a sales gain of about 13 percent.

As a corporation, Continental reduced its net indebtedness 25 percent during the quarter to about $5.8 billion, thus reducing gearing ratio to 43.2 percent. Conti achieved this in part by replacing the previous loan volume of more than $6.2 billion with a new syndicated loan in the same amount but with a reduced interest rate with 31 international banks, according to CFO Wolfgang Schäfer.

“This also gives us more leeway with regard to maturities,” Mr. Schäfer explained.