HANNOVER, Germany — Continental A.G. has raised its sales projections slightly for fiscal 2017 following a strong performance in the quarter ended March 31.
Operating earnings increased 9.1 percent to over $1.2 billion. Net income rose 2.1 percent to nearly $800 million.
Sales grew 9.5 percent to $11.7 billion, largely due to the contributions made by the company's automotive divisions. Sales in the Rubber Group, which comprises Conti's tire and ContiTech industrial rubber business divisions, climbed 10.6 percent to $4.57 billion.
As a result, Conti raised its sales projection for 2017 by 1.1 percent to more than $46 billion, while reaffirming the company expects to "comfortably achieve" an adjusted pre-tax operating margin of 10.5 percent.
The tire segment suffered an 8.6-percent drop in operating income, to $48.6 million, as the business unit dealt with more than $105 million in negative effects from rising raw material prices.
Conti noted, however, that it expects the impact of raw materials costs will ease later this year due to previous price adjustments.
Tire segment sales revenue grew 9.7 percent to $2.93 billion, based on solid growth in both the passenger/light truck and commercial tire businesses. Revenue in the latter was up 15 percent over the 2016 quarter, Conti said.
As a result, the operating margin slipped three-plus points to 17.9 percent.
In the tire division, the disposal of unnamed equity interests held as financial assets resulted in income on $14 million.
As for Conti's markets, the company noted:
Sales of replacement market passenger and light truck tires in Europe were up 6 percent for the quarter, but full-year expectations will be closer to 2 percent.
Demand for replacement truck tires rose 11 percent, influenced by customers bringing their purchases forward in advance of the price increases announced by various manufacturers. Demand is likely to normalize in the following quarters.
In North America, tire sales volumes increased by 2 percent and should continue to grow at about the same pace in light of the rise in the number of miles driven.
In commercial tires, sales volumes increased 12 percent, again driven by customers buying ahead of price increases. Conti anticipates full-year growth will be closer to 1 percent.
Asian replacement demand continues to rise, led by China, where preliminary industry data indicate demand was up 10 percent in the period.
The growing economies in India and Japan also likely resulted in higher sales volumes of replacement tires, but demand growth was rather more modest in South Korea and the ASEAN countries.
For Asia as a whole, Conti anticipates replacement sales growth of 5 percent for both passenger and light commercial vehicles in 2017.
In South America, preliminary figures indicate that demand for replacement tires for passenger cars and light commercial vehicles increased 5 percent despite the continuing difficult economic situation.