Conti on track for 10% sales growth in 2011
The first quarter of 2011 will form a “solid foundation” for Continental Corporation’s year as a whole, the tyre and automotive component supplier reported at its annual shareholders’ meeting. The complete report for the first quarter won’t be released until May 5, however at the April 28 event, Continental reported a 20+ per cent year-on-year sales increase during the first three months to more than 7.3 billion euros. EBIT, at nearly 634 million euros, was around 140 million euros higher than in the first quarter of 2010.
Commenting on these results, Continental Executive Board chairman Dr. Elmar Degenhart said “2011 began as we expected – despite the natural disaster in Japan and its aftermath. In face of the ongoing challenges, especially those presented by high raw material prices, we anticipate at this point in time that we will comfortably achieve the targets we have set ourselves for this year. This is not, however, a sure-fire thing, but will require hard and dedicated work.”
Reporting on the 2010 financial year, Degenhart reported a “record-breaking result” for Conti’s Passenger and Light Truck Tires division and noted its “strong cash flow played a major role in reducing the corporation’s debt while concurrently allowing it to make additional large investments.” Total 2010 sales amounted to 26 million euros, a 30 per cent year-on-year increase. The increase in sales experienced in the Asia region was even more marked; up almost 50 per cent from 2009: “Nowadays we are generating over 4 billion euros there and still stepping on the gas,” Degenhart commented. EBIT rose by 3 billion euros to 1.9 billion in 2010, with a margin of more than seven per cent; in 2009 this margin was minus five. The company’s debt dropped to 7.3 billion euros, while net income increased by more than 2 billion euros year-on-year to 576 million euros.
Dr. Degenhart stated that Continental anticipates increasing its full year 2011 sales by 10 per cent year-on-year to more than 28.5 billion euros and is aiming to maintain its 2010 EBIT margin of 9.7 per cent. He noted, however, that this year will have “many more surprises in store” and that Continental must therefore “remain realistic” about the factors influencing the global economy. “Evidently there are simply no more ‘normal’ fiscal years anymore,” Degenhart reflected. “Rather, we must adapt to managing the unexpected on an almost daily basis and understanding that as normality.” Stated challenges the company faces this year are high raw material costs, the adverse effects from the disaster in Japan. Sales losses in the Japanese market however have, Degenhart added, remained “within manageable limits.”
Reflecting the company’s recent positive performance, Dr. Degenhart reported that “a few weeks ago, another window to the future opened for Continental,” namely, the opportunity to return to the DAX index, the stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. “I am sure you have followed the news that two credit institutes sold 30 million Continental shares as arranged with our major shareholder Schaeffler. This means that the free float of Continental shares has risen to almost 40 per cent. It also provides us with the option of moving back to the DAX once again, following our first return in 2003. However, this is by no means a sure thing.”
As mentioned above, Continental’s Asian sales growth outstripped that in other markets. Dr. Degenhart told shareholders at the annual meeting in Hannover, Germany that “Asia is our declared future market.” The company is targeting above-average profitable growth for the region, particularly in China, and holds similar targets for India (as well as Brazil and Russia). Growth for the company’s Rubber division in Asia in expected to be boosted by its new tyre factory in Hefei, China, which entered production in early 2011 and by Continental’s recent acquisition of India’s Modi Tyres.
Other regions also feature strongly in Continental’s growth plans; Dr. Degenhart stated the company will “quickly” double its tyre production capacity there and confirmed plans to establish a new plant in Russia. Also announced at the annual shareholders’ meetings were approved plans to erect a new tyre factory in the NAFTA region. “Not least of all, we also want to cover rising demand in the NAFTA region, including the large US market, with local production – so there are plans for a new tyre factory there, too. The location for this greenfield project will not be announced until later in the year.