Tire unit aids Conti's earnings growth

HANOVER, Germany (Aug. 3, 2016) — Continental A.G. is raising its earnings forecast for fiscal 2017 slightly based on better-than-expected first-half figures — especially pertaining to the tire and rubber goods sectors.

Continental Chairman Elmar Degenhart singled out the company's Rubber Group's “excellent operating performance” for the firm's confidence, noting the unit's “very positive unit sales development…has given us an additional boost.”

The company expects its full-year pre-tax operating margin to exceed 11 percent, up from the previously published estimate of about 11 percent. Its development is also being helped by lower-than-expected raw materials costs.

Overall, Conti reported 6-percent higher pre-tax operating income of $3.66 billion on 2.3-percent higher sales of $22.5 billion. Net income was up 13.1 percent to $1.84 billion.

The Rubber Group reported 12-percent increase in pre-tax income of $2.03 billion on 2.4-percent higher sales of $8.87 billion. The adjusted EBIT margin increased by 2.3 percentage points to 18.8 percent.

Tire division earnings were up 11.1 percent to $1,61 billion on 2.8-percent higher sales of $5.85 billion, yielding a 27.5-percent earning ratio.

Mr. Degenhart also noted that Conti's automotive business picked up momentum in the second quarter, growing faster than the market in general.

“Over the remainder of the year,” he said, “we expect the positive sales momentum to continue in line with our outlook for the fiscal year. However, markets are currently expected to remain volatile due to continuing uncertainty, particularly in light of recent political developments.”

In the first six months of 2016, Continental invested $1.03 billion in property, plant and equipment and software and $1.57 billion on research and development, increases of 12.8 and 13.2 percent, respectively.

“Our growing financial strength enables us to increase investment in research and development. In doing so, we intend to set the course for pioneering technologies at an early stage and continue our rapid, profitable growth on a long-term basis,” Mr. Degenhart said.