Continental AG Reports 2008 Record Net Loss

19th February 2009 | 0 Comments
 

Continental AG has reported a record group net loss for 2008, following what executive board chairman Dr Karl-Thomas Neumann called “an unusual year.” The net loss was the result of the company having to write down 1.23 billion euros of “goodwill impairment” due to poor performance in the automotive group’s powertrain division. This was compounded by the effects of high raw material costs and dramatic falls in OE demand during 2008. Consolidated sales came in at 24.239 billion euros, with a group margin of 7.6 per cent – a figure within the company’s “EBIT target corridor.” Nevertheless Continental was able to reduce net indebtedness by roughly 373 million euros, leaving 10.483 billion euros.

Rubber group figures for 2008 faired considerably better with sales of 9.35 billion euros and 10.5 per cent margin. Passenger and Light Truck Tire posted sales of 5.1 billion euros, adjusted pre-tax profits (EBIT) of 644.8 million euros equating to a margin of 13.1 per cent. ContiTech’s numbers totalled 3 billion euros, 327.8 million euros and 11 per cent for sales, adjusted EBIT and margin. Commercial Vehicle Tire (CVT), however, survived on a slim margin of 2.7 per cent (36.3 million euros) despite sales of over a billion. Dr Hans-Joachim Nikolin, executive board member responsible for commercial vehicle tyres, explained that the virtual collapse of OE demand and raw material prices were at the root of the division’s narrow margins. The 290 million euros of increased costs the group had to pay as a result of raw material price increases at the root of CVT’s woes as this division had to face 100 million euros of this figure alone. However, commercial vehicle tyre’s particularly dependence on OE sales is also exposed in the full-year 2008 results.

Short time work, job losses and more turbulence expected in 2009

Continental has now ramped up what it has already described as the largest cost-cutting programme is the company’s history. In practical terms this means the “cost containment programme” will result in short-time working and job losses at ContiTech and tyre plants in Western Europe. Executive board representatives mentioned plants in Northern Germany.

Summing up 2008, Dr Neumann described the company as being “very energetic in our efforts to build the new Continental,” adding that the company was “successful at this in the first half of the year,” however, due to the intense pressure from the Schaeffler Group takeover bid and the media coverage that surrounded it the company faced completely different challenges in the second half of 2008. Dr Neumann also conceded that the purchase of Siemens VDO purchase was “certainly not a bargain.” Commenting on the Schaeffler Group bid, he said: “We had to take into account the interests of all stakeholders and at the same time establish the basis for a constructive, future orientated, value generating collaboration with a new major shareholder.”

Executives shied away from predicting much for 2009. They did however confirm that there will be no dividend: “Foregoing a dividend payment is another important step in lowering indebtedness. We anticipate that we will also be able to generate substantial free cash flow in 2009. For this reason, as things look now it can be assumed that Continental will fulfil the obligations set out in the loan agreements (covenant level), stipulated on a quarterly basis.”

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Category: Product News