Continental AG has announced net income up 33.4% in the first quarter to EUR221.9m on sales of EUR3,611.6m (up 11%). However, the firm did note a negative impact this year from high raw material prices.
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“We had a very good first quarter, with all divisions achieving significant growth in quantities and sales despite the difficult position of several customers. 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,” said Continental Executive Board chairman Manfred Wennemer.
He also pointed out risks from rising costs for raw materials and the continuing unsatisfactory development of the automotive markets on the whole.
Consolidated sales for the first quarter of 2006 rose by 11% compared with the same period of the previous year to EUR3,611.6 million (PY: EUR3,253.1 million). Before consolidation changes and exchange rate effects, consolidated sales increased by 8.8%. The consolidated operating result (EBIT) rose by 25.5% to EUR352.4 million (PY: EUR280.9 million) and the return on sales to 9.8% (PY: 8.6 percent). The net income attributable to the shareholders of the parent were up 33.4 percent to EUR221.9 million (PY: EUR166.4 million) as well as earnings per share to EUR1.52 (previous year: EUR1.14).
“Raw material prices are being driven to new heights from continuing heavy demand for raw materials worldwide, political uncertainties and ongoing speculation. The increasing raw material prices, in particular for natural rubber and oil, reduced EBIT in the first quarter by approximately EUR50 million compared with the average prices for 2005 as a whole and by about EUR79 million compared with the prices for the first quarter of 2005. We assume that this negative trend will continue in the next quarters of 2006 as well,” said Dr. Alan Hippe, Executive Board member responsible for finance.
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By GlobalData“Like last year, we will try to compensate the rising prices for materials, particularly for crude oil, natural rubber and steel, with price increases, mix improvements, and rationalization measures.”
Wennemer also said that the company is ‘investing heavily in the future’.
For the three months to March 31, 2006, research and development expense rose by 9.4% compared with the same period of 2005 to EUR156.1 million (PY: EUR142.7 million). At the same time, EUR200.1 million (PY: EUR 158.4 million) was invested in property, plant and equipment, and software. Investments concentrated on production lines for the new generation of electronic brake systems and the expansion of production capacities in low-cost countries, especially in Camaçari, Brazil and Malaysia. The capital expenditure ratio after three months amounted to 5.5% (PY: 4.9%).
“We are, therefore, investing within a reasonable scope, creating the basis for sustainable growth in the future,” said Wennemer. “For the year on the whole, we anticipate a capital expenditure ratio somewhat higher than 6% of sales.”
Sales of the Automotive Systems division increased during the first quarter of 2006 by 12% to EUR1,435.0 million (PY: EUR1,281.6 million). Before exchange rate effects, sales grew by 9.3%. Automotive Systems boosted its operating result (EBIT) by 22.3% to EUR151.4 million (PY: EUR123.8 million), with the return on sales rising to 10.6% (PY: 9.7%).
The Passenger and Light Truck Tires division increased sales for the first three months of 2006 in comparison to the first quarter of 2005 by 11.1% to EUR1,089.1 million (PY: EUR980.6 million). Before exchange rate effects, sales rose by 7.6%.
The increasing raw material prices impacted the result for the first quarter 2006 by approximately EUR23 million compared with the average prices for 2005 as a whole and by about EUR45 million compared with the prices for the first quarter of 2005. The division lifted its operating result (EBIT) by 18.6% to EUR108.0 million (PY: EUR91.1 million), achieving a return on sales of 9.9% (PY: 9.3 percent).
The Commercial Vehicle Tires division recorded a rise in sales for the first three months of 2006 of 12.9% to EUR346.2 million (previous year: EUR306.6 million). Before exchange rate effects and changes in the scope of consolidation, sales were up by 8.2% compared with the same period in the previous year. The increasing raw material prices impacted the result for the first quarter of 2006 by approximately EUR20 million compared with the average prices for 2005 as a whole and by about EUR27 million compared with the prices for the first quarter of 2005. The division boosted its operating result (EBIT) by 12.6% to EUR19.7 million (PY: EUR17.5 million). As in the previous year, the return on sales amounted to 5.7%.
