HANOVER, Germany (Aug. 4, 2015) — Continental A.G. is raising its earnings forecast slightly for fiscal 2015 after posting a “successful first half” and taking into account falling crude oil and natural rubber (NR) prices.
For the period ended June 30, Conti reported a 19.4-percent jump in adjusted pre-tax operating income to $2.41 billion on 15.8-percent higher sales of $21.9 billion, yielding an operating ratio of 11 percent. Net income was up 11.1 percent to $1.62 billion.
Conti attributed a major portion of its growth to the first-time inclusion of results from Veyance Technologies, the former Goodyear engineered products business whose acquisition was finalized in the fourth quarter of 2014.
Discounting Veyance's inclusion, Conti reported 4.4-percent organic growth in the second quarter, spurred in part by double-digit sales growth in Asia.
For the year, Conti now anticipates achieving 11-percent adjusted pre-tax operating earnings, up a half percentage point from earlier forecasts, together with 20-percent growth in free cash flow before acquisitions.
One key factor in the positive outlook is Conti's belief that crude oil and NR prices will continue to weaken, yielding a positive effect on earings of nearly $225 million, up 33.3 percent over earlier projections, the company said, noting it estimates NR prices will fall to $1.58 per kilogram, down from earlier projections of $1.62.
Conti's tire division reported 16-percent higher adjusted operating income of $164.7 million on 7.2-percent better sales of $5.65 billion. The company attributed higher aftermarket consumer tire sales volumes in the Americas, increased OE sales worldwide and better commercial vehicle tire business globally for the improved sales and earnings.
The firm did not provide regional breakdowns of its divisional results.
“We proved how strong we are in a challenging environment,” Conti Chairman Elmar Degenhart said, referring to the firm's organic growth in the quarter.
“Despite a slowdown in the growth rate of vehicle production in Asia, we anticipate stable business development in the remaining half of the year at the high level already achieved,” he added.
Conti expects its net indebtedness to fall below $4.5 billion by year-end as it plans to redeem a $950 million U.S. dollar bond in the coming weeks — four years ahead of the maturity date — to take advantage of other debt instruments with “considerably” more favorable terms.