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Continental AG Posts First-Half Profit as Car Sales Lift Demand for Parts
Continental AG, Europe’s second- largest auto-parts supplier, dropped in Frankfurt today after posting a second-quarter profit that missed analysts’ estimates.
Net income was 121 million euros ($158 million), compared with a 190 million-euro loss a year earlier, the Hanover, Germany-based company said in a statement today. Analysts had forecast profit of 187 million euros, according to the average of five estimates compiled by Bloomberg. Revenue rose 40 percent to 6.66 billion euros.
Continental, which is also Europe’s No. 2 maker of tires, aims to reorganize more than 8 billion euros of debt as it works toward merging with majority shareholder Schaeffler Group. The parts supplier returned to profit in the first quarter after cutting thousands of jobs and reducing spending on development projects.
“The expectations might have gotten a bit too high,” said Arndt Ellinghorst, an analyst with Credit Suisse in London with an “outperform” recommendation on the shares.
Continental fell 61.5 cents to 48.03 euros at the close of trading at 5:30 p.m. in Frankfurt. The stock has gained 32 percent this year, valuing the company at 9.6 billion euros.
Sales this year will probably gain more than 15 percent, Chief Financial Officer Wolfgang Schaefer said in a telephone interview. He reiterated the 2010 operating margin, adjusted for one-time effects, would be in a range of 8 percent to 8.5 percent.
Powertrain
Adjusted second-quarter earnings before interest and taxes at the automotive division, which includes the interior and powertrain units, grew more than eightfold to 305 million euros, while the rubber division posted a 60 percent increase to 414 million euros.
“The powertrain business posted two strong quarters, and if the positive development continues, we may be able to break even this year” instead of in 2011, Schaefer said.
Selling the rubber unit or parts of it isn’t currently being considered, Schaefer said.
The company agreed with banks in December on a 2.5 billion- euro loan and sold shares worth 1.1 billion euros in January. The funds are used to extend debt maturing in August for two more years. Earlier this month, Continental sold 750 million euros of five-year high-yield bonds.
Bond Sale
The company plans to sell a total of as much as 4 billion euros in bonds to stretch out its debt repayment schedule, and will makes the sales when it’s “opportune,” Schaefer said. He added that he expects better yields than the 8.75 percent for the first bond.
Continental’s debt stems from its 2007 purchase of Siemens AG’s VDO auto-component business. The comp
Schaeffler, the world’s second-biggest maker of roller- bearings, will be “ready” late next year to begin a merger with Continental, Chief Executive Officer Juergen Geissinger said July 27. The company is weighed down by about 12 billion euros of debt from acquiring a 75 percent stake in Continental.
“Continental is well on its way to emerging from the crisis stronger than before, as demonstrated by the successes achieved in operations,” Chief Executive Officer Elmar Degenhart said in the statement.
To contact the reporter on this story: Cornelius Rahn in Frankfurt at crahn2@bloomberg.net
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