Conti has 'record-breaking” first half: US tyre unit still losing money

By Liz White, ERJ staff

Hanover, Germany-Sales for Continental AG rose 10.6 percent to Euro 6808 million while earnings (EBIT) rose 28.5 percent to Euro 687.3 million. But its US Passenger and Light Truck Tyres operation is still giving cause for concern and Chairman Manfred Wennemer said this division is not expected to break even this year.

The tyre, rubber parts, and automotive systems supplier achieved continuing record-breaking performance despite the rather weak economic situation in parts of the automotive industry,” according to a Continental statement.

"In the first six months, we made considerable progress towards our goal of achieving new top figures and are looking at the second half of the year with confidence," said Wennemer, at Conti's half-year results meeting, 2 Aug in Hanover,

The German group's acquisition of its major German competitor Phoenix contributed Euro 494 million in sales, or some 7 percent of turnover, but only Euro 28.1 million to earnings, or 4 percent of the group total.

Discussing the US tyre unit, Wennemer-currently head of the Passenger and Light Truck Tyres division-said, "At present, we do not assume that we will be able to achieve our goal of breaking even in the US passenger and light truck tyres business in the fourth quarter of 2005."

A more sluggish market than expected was one cause, according to Conti's statement. And, while the US figures are quite close to Conti's target, many factors would have to turn out positively in order for us to just break even,” said Dr Alan Hippe, president of Continental Tire North America (CTNA) as well as the group's finance director. He was keen to play down the significance of the US figures: this shows that we are not in the middle of a catastrophic scenario, but rather that things are just progressing much more slowly than expected.”

Sales in passenger car and LT tyres rose 8.3 percent to Euro 2081.2 million, with Euro 64.5 million allocated for restructuring at Conti's US plant at Mayfield. EBIT rose 49.2 percent to Euro 247.5 million, the group said.

In Commercial Vehicle Tyres, sales fell 8.8 percent to Euro 651 million, although before consolidation changes and exchange rate effects, sales increased by 8.0 percent. A major change in consolidation was the reassignment of Continental Sime Tyre to the passenger/LT unit. EBIT in CV tyres rose 8.5 percent to Euro 51 million.

In the ContiTech rubber products division, sales rose by 49 percent to Euro 1469 million as a result of the Phoenix buy, with EBIT up by 36.6 percent to Euro 131 million.

In Conti's Automotive Systems division sales rose 3.4 percent to Euro 2656 million, with EBIT up by 13 percent to Euro 278.3 million.

Conti's capital expenditure for the half year was up substantially,” to Euro 346 million (PY: Euro 280 million), largely for production lines for its new generation of electronic brake systems, but also to expand production in low-cost countries, especially at Camaçari in Brazil, the group said.