Conti sales, earnings up, but more price increases pending

Hanover, Germany - Continental AG reported double-digit growth in sales and earnings in the first quarter, but management cautioned that rising raw materials costs likely will prompt more price increases.

For the period ended March 31, Conti reported a 33.4-percent jump in net earnings to $266.7 million while sales grew 11 percent to $4340 million. A portion of the sales gain came from currency exchange rate differences. Operating profits were up 25.5 percent to $423.6 million.

"We had a very good first quarter, with all divisions achieving significant growth in quantities and sales despite the difficult position of several customers," said Manfred Wennemer, Continental executive board chairman. "Thus, in a demanding environment, we have kept our sights firmly on our goal of outperforming the sales and operating result of the first quarter of 2005."

Looking ahead, Wennemer cautioned that rising costs for raw materials and the continuing unsat-isfactory development of the automotive markets on the whole pose risks for the firm's continued growth.

Conti estimated higher raw materials costs reduced pre-tax profits by $60 million to $95 million and that the trend will continue throughout the rest of 2006.

"Like last year, we will try to com-pensate the rising prices for materials, particularly for crude oil, natural rubber and steel, with price increases, mix improvements, and rationalization measures," said Alan Hippe, the executive board member responsible for finance.

Conti's tyre businesses both reported solid sales and earnings gains in the period.

The passenger and light truck tyre division reported an 18.6-percent gain in operating earnings, to $129.8 million, on 11-percent better sales of $1.31 billion. The sales gain came primarily from Europe; replacement sales in North America fell short of those a year earlier, Conti said. OE sales globally grew 5 percent.

The commercial vehicle tyre division reported 12.6-percent higher earnings of $23.7 million on 12.9-percent better sales of $416.1 million. Sales in North America exceeded those of a year earlier, with gains at OE offsetting a slight decline in aftermarket sales.

The ContiTech diversified products business reported 42.6-percent better earnings of $99.6 million on 8.8-percent higher sales of $925.6 million, as all business units within the division exceeded their 2005 sales and earnings performances.

From Rubber & Plastics News (A Crain publication)