HANNOVER, Germany (May 5, 2016) — Continental A.G. is raising its earnings forecast for fiscal 2016 slightly, based on better-than-expected sales growth in the first quarter, particularly in the tire and rubber sectors.
For the quarter ended March 31, Conti reported a 6.4-percent gain in pre-tax operating profit to $1.15 billion, while sales revenue rose 2.9 percent to $9.57 billion in a period Conti Chairman Elmar Degenhart termed a “difficult market environment.”
Tire division sales rose 3.8 percent in the quarter ended March 31 to $2.77 billion on higher volumes in both the consumer and commercial sectors. Conti said aftermarket demand for consumer and commercial tires in North America rose 5 and 4 percent, respectively, but that it expects demand growth for the whole year to be closer to 2 percent.
The division's adjusted pre-tax operating income jumped 17 percent to $726.4 million, yielding an earnings ratio of 26.2 percent.
On the back of lower raw material costs, Continental raised the Rubber Group's adjusted EBIT margin forecast for full year 2016 to more than 16 percent from around 15.5 percent .
“We still expect a positive effect of about [$110 million] resulting from lower raw material costs for the Rubber Group in 2016,” Continental said.
The company has maintained its estimate for the average price of natural rubber (TSR 20) in 2016 at $1.50 per kilogram, and for butadiene, a base material for synthetic rubber, at 90 cents per kilogram.
Overall, Conti management is forecasting global demand growth for consumer and commercial tires of 2 and 1 percent, respectively, with the commercial growth expectation down from 2 percent.