Conti posts record earnings; expects synergies of Euro 300 m in 2010 from VDO acquisition

ERJ staff report (SS)

Hanover, Germany -- Continental AG announced that its consolidated sales for the year ending 31 Dec 2007, rose to Euro 15 960.1 million, from Euro 14 887 million, an increase of 7.2 percent year-on-year.

The company 's consolidated operating result (EBIT) also increased to Euro 1839.8 million from Euro 1601.9 million in 2006.

Consolidated EBITDA improved year-on-year to Euro 2490.6 million from by Euro 189.1 million.

The VDO unit, which Conti acquired from Siemens last summer, in a deal worth Euro 11 400 million, contributed Euro 659.3 million to sales.

Executive board chairman at Conti, Manfred Wennemer said, in a 21 Feb statement, that the company plans to continue its record streak in 2008.

“Despite the clouds hanging over the economic environment, we are setting clear targets: strengthened by our Siemens VDO acquisition, in 2008 we intend to improve the total calculated sales generated in 2007 of around Euro 26 400 million,” he said.

Wennemer said that Conti's priority in 2008 is to “reduce debt,” and therefore the company will not be increasing its dividend in 2008 and 2009, after proposing a 2007 dividend of Euro 2 per share, unchanged from last year.

“By the end of 2010, we want to reduce our gearing ratio to our strategic target figure of 80 percent to 100 percent,” said Wennemer.

The company's free cash flow before acquisition was Euro 1050 million in 2007, and it expects to generate a further Euro 1000 million here in 2009.

Wennemer emphasised that for Conti, 2008 will be dominated by the integration of the Siemens VDO business.

“As announced, we will tackle all the required projects this year and work through most of them,” he said.

“Based on previous analyses, in connection with the Siemens VDO integration we see an opportunity to leverage net synergies of more than Euro 300 million in 2010,” he added.

According to Wennemer, restructuring expensees for the Siemens unit will “fluctuate in the lower three-digit million range.”

Conti also announced that it was hiking its guidance for synergies to be achieved from the integration of the former Siemens unit to Euro 300 million from 2010.

The company said that it would be disappointed if it could not exceed its initial guidance of Euro 170 million in annual synergies from 2010.

Looking ahead, Conti said that in 2008 it aims to achieve sales of Euro 26 400 million, a figure which it intends to further grow by 5 percent in 2009, to meet strategic goals.