Automotive parts and tyre maker Continental reaffirmed its full year forecast on Tuesday after Japanese rival Bridgestone cut its earnings forecast by 35%.
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“We have no information that would cause us to deviate from our targets,” chief executive Manfred Wennemer told Reuters. “Everything speaks for a rise in annual revenue and earnings as we had forecast,” he continued, adding that its tyre business generates less than half of Continental’s group turnover.
Reuters noted that Bridgestone slashed its earnings forecast for the current year saying the rising costs of natural rubber, oil and other raw materials as well as the closing of a US manufacturing plant were to blame.
Last Thursday, Continental’s chief financial officer reportedly said in an interview that he expects second-quarter earnings before interest and taxes (EBIT) to rise once one-off effects from both 2005 and 2006 are excluded.
“The trend from the first quarter has continued and it looks as if we will definitely see an improvement on an operating level this quarter,” Alan Hippe told Reuters at the time.
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By GlobalData“The development supports our guidance for an increase in EBIT and revenue in the full year,” the CFO reportedly added.
Nevertheless, he would not rule out a decline in reported second-quarter EBIT that includes special items.
According to Reuters, Hippe expects restructuring costs – mainly for its car tyre plant in Charlotte – that are clearly lower than EUR90m ($US114m) in the second quarter.
This compares with a one-off gain of EUR27m in the second-quarter last year due to a change in US pension accounting, he said.
Reuters noted that, last Wednesday, Goodyear Tyre & Rubber said it would trim production in North America by 8%, while warning that 2006 operating income in the key region’s tyre unit will fall below 2005 levels because of weak tyre demand industry wide and escalating raw-material costs.
Michelin , the world’s largest tyre maker, reportedly warned in mid-May that it would be harder to achieve its full-year target of maintaining its 2005 core operating margin of 8.8% due to high commodity prices.
