Continental AG, around which ball bearing specialist Schaeffler has painted a target for takeover, said on Thursday it has its own targets for the full year firmly in sight “despite [the] difficult market environment” after sales rose 65% to EUR13.25bn in the first half and earnings before interest and tax (EBIT) rose to EUR1.19bn, a 9.7% margin, in the second quarter. Half year net profit fell 37.1%, however.
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“Following a solid start in the first quarter and an impressive second quarter, we are expecting to post sales exceeding EUR26.4bn as planned, although that target will be more difficult to achieve, especially in light of the significant cuts in production in the US,” said Continental executive board chairman Manfred Wennemer today in Hanover.
“Also, we confirm our goal to exceed the pro forma adjusted EBIT margin of 9.3% achieved for the year 2007, before amortisation and depreciation resulting from the purchase price allocation as well as integration and restructuring expenses.”
Wennemer emphasised the reduction of debt as the top goal: “We are confident that we shall be able to reduce the level of debt this year substantially. A help here will be the strong free cash flow, which at EUR469.5m in the second quarter of 2008 alone is much higher than the good value for the same period last year (EUR104.3m).”
Consolidated sales in the half of 2008 rose 65.4% to EUR13,254.0m. Consolidated EBIT was up by EUR271.5m, or 29.4%.
Continental said rising raw material prices had a negative impact of approximately EUR84m on EBIT in the first half of 2008 compared with H1 2007.
“We anticipate that we will be able to offset a large portion of these cost increases in the tyre divisions, especially with mix improvements, improvements in efficiency and price increases during the remainder of the year,” said Wennemer. “In the automotive divisions, we are expecting to compensate for the rise in raw material costs by improving efficiency and passing on the cost increases to our customers.”
Net income was down 37.1% to EUR361.1m with earnings per share lower at EUR2.23 vs EUR3.91.
