Conti growth ‘sets new records’
Continental Corporation says its 2011 sales, operating results and net income results “set new records.” Reporting at the company’s annual financial press conference on 1 March, l CEO Dr. Elmar Degenhart said in 2011 Continental “grew nearly twice as much as the relevant markets in almost all business areas and generated a sales increase of 17 per cent to 30.5 billion euros. At the same time, our operating result (EBIT) increased twice as fast as sales to approximately 2.6 billion euros. We significantly improved our EBIT margin from 7.4 per cent in the previous year to 8.5 per cent. For the first time since 2006, all divisions were in the black again despite of the acquisition-related write-downs that will continue up to and including 2014.” He further reported adjusted EBIT (adjusted in particular for acquisition-related write-downs and special effects) of “a good 3 billion euros” and a margin of 10.1 per cent, figures exceeding the forecast issued at the start of 2010.
Outlining Conti’s expectation for 2010, Degenhart added: “For the current fiscal year, we expect the corporation’s sales to rise by more than five per cent to more than 32 billion euros. We are assuming here that global production of cars with a total weight of up to six tons will increase from around 76 million units to approximately 77 million units and that demand on Continental’s key replacement tire markets in the NAFTA region and Europe will grow only slightly. At the same time, we aim to match the high level of the adjusted EBIT margin from 2011 in 2012 as well.”
Company profit, or net income attributable to the shareholders of the parent, more than doubled to a good 1.2 billion euros in 2011. Earnings per share rose year-on-year from 2.88 euros to 6.21 euros. “On this basis, we will propose to the Annual Shareholders’ Meeting in Hanover on April 27, 2012 that a dividend of 1.50 euros per share be paid out for fiscal 2011,” Degenhart continued. “In relation to the average share price in 2011, this corresponds to a dividend yield of 2.6 per cent. In this way, we wish to allow our shareholders to participate in the company’s success.” The dividend payout ratio relative to the net income attributable to shareholders of the parent is 24.2 per cent.
CFO Wolfgang Schäfer commented that Continental had further reduced its level of debt as announced: “We have reduced our net indebtedness by another half a billion euros to roughly 6.8 billion euros. Our free cash flow of approximately 491 million euros played an important role here. Overall, we have therefore reduced our net indebtedness by more than 4 billion euros within four years, chiefly as a result of our operational strength, despite considerable negative influences from the financial and economic crisis in 2008/09 and enormous increases in commodities prices, which cost us around 1.5 billion euros in total in 2010 and 2011. This year we intend to reach a level of net indebtedness below 6.5 billion euros despite resuming dividend payments. We are planning a free cash flow of more than 600 million euros. Our ratio of net indebtedness to EBITDA (leverage ratio) is currently already 1.6 and is thus at a level of creditworthiness typical for companies classified in the investment grade category.”
In fiscal 2011, the ratio of net indebtedness to equity (gearing ratio) improved to 90 per cent at the end of 2011 after 118 per cent at the end of 2010 and 219 per cent at the end of 2009. “Our next goal is now to get to below 60 per cent in the medium term. We are also aiming for an equity ratio of between 30 per cent and 35 per cent. With equity of a good 7.5 billion euros, we achieved an equity ratio of 29.0 per cent in the past fiscal year, after 25.4 per cent at the end of 2010 and 17.6 per cent at the end of 2009,” said Schäfer. “We also created value for the second consecutive year. At 16.2 per cent, the return on capital employed (ROCE) was not only considerably higher than the previous year’s level of 12.4 per cent, but also significantly higher than the cost of capital, which amounts to a multi-year average of around ten per cent for our company.”
The number of employees at Continental worldwide has risen from 134,000 in 2009 to around 164,000 in 2011 – a good 15,000 more than in 2010. The company’s planned growth is supported by the rapid development and large-scale marketing of innovations. With continued increases in expenses for research and development, the company intends to remain at the forefront: “We spent 1.6 billion euros on our innovation centres, again roughly ten per cent more than in the previous year, thus reaching a record level. In relation to sales, this corresponds to a healthy 5.3 per cent, with the Automotive divisions accounting for the lion’s share with just under 1.4 billion euros and a ratio of 7.5 per cent. A total of 1.7 billion euros is budgeted for this year,” said Degenhart.
“But it is not only expenditure on research and development that we intend to use to secure our above-average growth,” the CEO added. “Our rate of capital expenditure also remains high: we invested 1.7 billion euros in property, plant and equipment and software, more than ever before in the company’s history. This corresponds to a ratio of 5.6 per cent. In the current year, we will systematically put our growth plans into action with a capital expenditure ratio of over six per cent. We are essentially aiming for sales growth that is roughly five percentage points higher than the growth of our reference markets.”