Veyance purchase impacts ContiTech results

Hanover, Germany – ContiTech AG’s earnings (EBIT) dropped to €171 million in 2015 compared to €433 million the previous year with the return on sales dropping to 3.2 percent from last year’s 11 percent, the German company announced on 26 April.

The German rubber parts supplier posted the lower earnings figures alongside a 37-percent rise in 2015 sales to around €5.4 billion.

Explaining the numbers, ContiTech spokeswoman Antje Lewe said that EBIT was mainly affected by ‘purchasing price allocation’ (PPA) for the acquisition of US-based Veyance Technologies and one-off effects.

“In 2015, intangible assets that resulted from purchase price allocation within the Veyance acquisition were written down. Special effects also had a negative impact,” Lewe said in a written statement.

In the past year, she added, prices for raw materials, most recently for oil, plunged dramatically in a continuation of the 2014 trend. This, according to Lewe, particularly affected business in industrial hoses and conveyor belts in our oil & gas segment.

Once the EBIT is adjusted by these effects, ContiTech generated a total of €388 million - 7.2 percent of sales.

“When we consider the challenging situation, this is a very pleasing result,” she added.

In terms of sales, Veyance Technologies, which ContiTech acquired at the beginning of 2015, contributed roughly €1.15 billion to sales or 4 percent organic growth in total.

The continuing decline in mining- and oil-dependent businesses, said ContiTech, was cushioned by a strong automotive industry.

"2015 was a challenging year, especially for our mining customers. The sector is still experiencing economic difficulties as commodity prices remain extremely low,” said ContiTech head Hans-Jürgen Duensing

“In the third quarter of 2015, this was accompanied by a significant deterioration in the oil industry," Duensing added at a press conference held at Hannover Messe 2016.

Duensing went on to explain that roughly 51 percent of company’s sales were generated by the automotive industry, largely offsetting any fluctuations.

In the past year, ContiTech invested €245 million in new plants and production expansions worldwide, as well as in cost-cutting measures.

"We have again reinforced our presence in Asia and North America to be where our customers are and thus meet the growing demand in these regions," said Duensing.

ContiTech invested predominantly in China, building a second plant for environmentally friendly automotive interior surfaces in Changzhou in 2015.

In Changshu, the first compounding centre was opened for supplying compounds locally and the production of hose applications in Hungary was expanded.

ContiTech also expanded its production capacity for air spring systems in Mexico and laid the foundations for a new conveyor belt factory in Morocco.