Conti reports strong half-year, expects lower NR prices

Hanover, Germany – Continental AG has raised its earnings forecast for the full fiscal year 2015 after posting a “successful first half”, the German company announced 4 Aug.

“Due to the continued, better-than-expected development in prices for crude oil and natural rubber (TSR 20), we are raising our forecast for the Rubber Group from more than 15 percent to around 16 percent,” said the Conti half-year financial results.

The company said that it was increasing its estimate for the positive effect from lower raw material costs from around €150 million to about €200 million in the current year. This, it added, relates mainly to the Rubber Group.

“We are lowering our estimate for the average price of natural rubber again, from $1.62 (€1.47) per kg to $1.58 per kg. By contrast, we are slightly raising our forecast for the average price of butadiene, a base material for synthetic rubber, from $0.95 per kilogram to $1.00 per kg,” the company explained.

The Rubber Group Division generated sales of €7.7 billion in the first half of 2015 and improved its adjusted EBIT margin by 1.3 percentage points, year-on-year, to 18.6 percent.

The tire division, said the report, posted a 7.2-percent rise in sales at €5,064 million, compared to the first half-year of 2014 at €4,724 million.

Compared with the same period last year, the tire division’s earnings rose by 14.6 percent to €135 million.

“Veyance Technologies contributed €562.8 million to the sales growth,” said the financial statement, adding that the sales growth of 37 percent was achieved before changes in the scope of consolidation and exchange rate effects.

ContiTech’s EBIT before amortisation and special effects, dropped by €11 million or 5 percent, to €209.3 million.

According to ContiTech, earnings were influenced by integration costs and non-recurring expenses for Veyance Technologies totaling €44.5 million.

“We proved how strong we are in a challenging environment and followed up on the good first quarter of 2015 with further growth of 4.4 percent before changes in the scope of consolidation and exchange rate effects in the second quarter,” said Continental chairman Elmar Degenhart.

This, he said, was also attributable to double-digit sales growth in Asia.

“Despite a slowdown in the growth rate of vehicle production in Asia, we anticipate stable business development in the remaining half of the year at the high level already achieved,” explained Degenhart.

Also commenting on the financial stability of the company, CFO Wolfgang Schaefer said that the company would be able to finance the acquisition of Veyance Technologies “due to our financial strength”.

“We will also redeem our US dollar bond with a volume of $950 million (€866 million) early in September this year, four years ahead of its maturity date,” added Schaefer.

“Our net indebtedness is currently expected to be below €4 billion at the end of the year,” he said.