Continental to Increase Prices at Start of 2007
Continental AG has spoken of plans to increase passenger car, SUV and light truck tyre prices across Europe. A Continental spokesperson in Hanover declined to give further details of the price rise, but explained that the move had been forced upon the manufacturer by consistently high raw material prices. Continental’s raw material costs are expected to total 300 million euros this year.
Financial analysts responded positively to news. “Even if we do not believe that further price increase will be successful, we read this news as positive. It tells us that Continental, like probably the rest of the industry will try to keep for themselves the recent drop of raw material prices, mostly natural rubber,” said one Deutsche Bank report.
The results is that rather than a hindrance 2006’s high raw material prices could end up helping Continental and other large manufacturers. (According to Deutsche Bank Michelin will have a raw material bill of around 800 million in 2006.) The analysts describe the effect as “a significant tailwind” that could have a 100 million euro positive impact on EBIT for Continental (+6 per cent) and could positively impact Michelin’s pre-tax profts by 300 million euros or 23 per cent in 2007.