Raw materials costs hit Conti Rubber Group

Hanover, Germany – Continental AG’s tire sales have slipped 4.4% year-on-year to €2,635.5 million in the first quarter of 2018, due in part to exchange rate effects and “changes in scope of consolidation”.

In the first three months of 2018, sales volumes for passenger and light truck tires in both original equipment business and tire replacement business were down “slightly” compared with the first quarter of 2017.

Sales figures in commercial-vehicle tire business were also 5% lower than the high level of the previous year, Conti added.

At €545.8 million, earnings (EBITDA) was down 16.1% for the three months to end of March, compared to the same period in 2017.

Conti, however, added that the Tire division had grown “two percentage points faster than the market, which declined slightly at the international level...”

Performance in the ContiTech division was better with first-quarter sales up 5.3% at €1,601.7 million, while earnings rose 2.4% to €195.9 million.

The conveyor belt group and industrial fluid systems business units posted “considerable sales growth” compared to the low figures for the same period in the previous year, Continental said.

Overall, the two Rubber Group units generated sales of €4.2 billion in the first three months, down from the prior-year €4.3 billion, while earnings declined 12.0% to €741.7 million.

Conti linked the earnings decline to the average price of North Sea Brent crude oil, which was up $13 a barrel in the first quarter.

Every $10 increase in the price of crude equates to a negative gross impact on the Rubber Group's operating income of about $50 million because of the oil-related raw materials, it said.

Conti is expecting its costs for carbon black and other rubber chemicals to rise at least 10% this year compared to 2017.

On the other hand, the company expects the price of butadiene to fall 5% to 6% this year, while the price for natural rubber is expected to come in below the 2017 average.