Continental AG to Keep Capital Spending at $2.58 Billion

Continental AG (CON), Europe’s second-largest auto-parts maker, will maintain investments in 2013 at last year’s level of 2 billion euros ($2.58 billion) as global production of cars and light trucks rises 2.5 percent.

Spending will be focused on expanding tire plants in the U.S., Russia, China and Brazil, as well as researching technology such as vehicle suspension and driver-assistance electronics, Chief Executive Officer Elmar Degenhart said. Vehicle production worldwide will probably increase to 83 million units this year, he said.

“We are currently preparing those functions that will be installed in tomorrow’s cars,” Degenhart said in the text of a speech to be delivered today at the annual shareholders’ meeting in Continental’s headquarters city of Hanover, Germany.

Continental, also Europe’s second-largest tiremaker, has sustained profit with a focus on supplying high-end auto manufacturers with parts such as safety sensors, emergency-brake systems and fuel-injection technology. The company reiterated targets today for sales growth and a limited decline in profitability this year.

First-quarter earnings before interest and taxes fell 5.1 percent to 747 million euros because of a decline at the tiremaking division. Ebit adjusted for acquisition-related costs and one-time gains or charges narrowed to 10 percent of sales from a restated 10.7 percent a year earlier. Revenue dropped 3.4 percent to 8.03 billion euros.

The parts maker is shrugging off the first-quarter declines as it prepares for a bond buyback to reduce interest costs. Continental is sticking to forecasts that revenue will rise by about 5 percent to exceed 34 billion euros this year, with adjusted Ebit amounting to more than 10 percent of revenue. The margin was 10.8 percent in 2012.

Degenhart reiterated statements from two months ago that the company may be ready for an acquisition of as much as 1 billion euros, probably outside of Europe and independent of the car industry.

To contact the reporter on this story: Dorothee Tschampa in Hanover at dtschampa@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net

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