Conti “Well on its Way” with H1 Results
In the words of Continental AG’s Executive Board chairman Dr. Elmar Degenhart, the German tyre and automotive systems manufacturer “is well on its way to emerging from the crisis stronger than before.” In particular, the company’s EBIT has developed positively and the EBIT margin exceeded pre-crisis levels during the first half of 2010. “This is also however obvious from our balance sheet, which we have improved substantially since the beginning of the year with the capital increase and the equally successful placement of an initial bond, as announced,” Degenhart added. “With this basis, we are tackling the upcoming tasks brimming with confidence.”
This EBIT, which as stated has out performed the pre-crisis level reached in the first half of 2008, amounted to 1.011 billion euros during the first half of the current financial year, nearly 100 million euros more than two years ago. Year-on-year, adjusted EBIT for the corporation was up in the first six months of 2010 by 1,057.4 million euros, or 425.2 per cent, to 1,306.1 million euros, equivalent to 10.4 per cent of adjusted sales. At the same time, consolidated sales in the first six months of 2010 rose by 39.6 per cent year-on-year to 12.65 billion euros; this figure, however, is still 600 million euros below the value for the first half of 2008. At 8.0 per cent, the EBIT margin in the first half of 2010 also climbed above the pre-crisis level: in the first six months of 2008, an EBIT margin of 6.9 per cent was recorded. Net income for the six months to June 30, 2010 was 348.9 million euros, compared with a net loss of 457.1 million euros a year earlier.
The performance of both the corporation’s Rubber Group and Automotive Group “confirms the recovery of the global automotive markets as well as the effectiveness of the cost-cutting programs initiated already in 2009,” says Continental. In the first half of 2010, the Rubber Group generated sales of 4.81 billion euros and reported EBIT of 690.7 million euros, with a 14.4 per cent margin, adjusted to 15.5 per cent. “In the first six months of this year, we already felt the effect of raw material costs, which have been rising since last year,” explained Degenhart. “It has however been possible to mitigate this effect with higher sales volumes on the whole. We are, though, expecting to be burdened further with roughly 250 million euros from rising raw material costs in the second half of 2010 alone.”
The Automotive Group’s sales in the first half of 2010 were 7.86 billion euros and EBIT amounted to 360.7 million euros, with a margin of 4.6 per cent. The adjusted EBIT margin was 7.7 per cent. “So after a very good start to the year in the Automotive Group, the positive trend continues. If business continues to thrive, break-even point for the Powertrain division will be within reach by as early as the end of this year,” Degenhart commented.
At 8,016.9 million euros, the company’s net indebtedness on June 30 was 878.6 million euros lower than on December 31, 2009, and 1,729.7 million euros lower than on June 30, 2009. Since the end of 2007, Continental has been able to reduce its net indebtedness by more than 2.8 billion euros. This reduction can be attributed in particular to the capital increase implemented in January 2010, which resulted in net proceeds of some one billion euros, plus the strong free cash flow experienced during the past two years. The resultant strengthening of the company’s capital base (equity ratio 24.6 per cent) in conjunction with the reduction of net indebtedness produced a gearing ratio of 133 per cent, a major improvement in comparison to the 186 per cent ratio for the same period of 2009. With the most recent finance measures, it was also possible to further improve the maturities profile of the company’s indebtedness.
Upon announcing the company’s first-half performance, Dr. Degenhart confirmed the outlook that was adjusted in early July. “In view of the development of Continental’s most important sales markets, we are upping our sales forecast from at least five per cent to about 15 per cent for 2010. We still expect a significant year-on-year increase in adjusted EBIT. From the current perspective, we anticipate that the adjusted EBIT margin will be in the range of 8.0 per cent to 8.5 per cent for 2010. Here, we expect to be burdened with roughly an additional 250 million euros from rising raw material costs in the second half of 2010 alone. Special effects, which amounted to 70 million euros in the first half of 2010, are expected to total about 100 million euros for the whole year.
At the end of the second quarter of 2010 Continental employed a total of 142,765, people worldwide, an increase of 8,331 compared with the end of 2009 and of 12,231 compared with the prior-year period.