04.11.2014
Continental AG DE0005439004
DGAP-News: Continental Demonstrates Earnings Resilience and Confirms Sales and Earnings Forecast for 2014
DGAP-News: Continental AG / Key word(s): 9-month figures/Interim
Report
Continental Demonstrates Earnings Resilience and Confirms Sales and
Earnings Forecast for 2014
04.11.2014 / 08:01
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- Net income up 14.1% to EUR1.8 billion after nine months
- Sales rise by nearly 3% to EUR25.6 billion
- EBIT at EUR2.4 billion after three quarters
- Non-recurring expenses to strengthen future profitability of Powertrain
division total EUR334 million
- Forecast for free cash flow before acquisitions raised to EUR1.8 billion
Hanover, November 4, 2014. The Continental Corporation demonstrated its
earnings resilience again in the first three quarters of 2014, with net
income increasing at an above-average rate of 14.1% year-on-year to EUR1.8
billion. Earnings per share climbed to EUR8.99 after EUR7.88 in the same
period of the previous year. At the same time, the international automotive
supplier, tire manu-facturer and industrial partner confirmed its forecast
for the current fiscal year after a solid third quarter.
"We are keeping our sights set firmly on our target for the adjusted EBIT
margin, which we raised to around 11% after the first half of the year, and
we even consider it realistic that we may slightly exceed this level at the
end of the year. Sales are expected to total approximately EUR34.5 billion
this year, despite the negative exchange rate effects of EUR650 million
that we recorded in the first nine months," said Dr. Elmar Degenhart,
chairman of Continental's Executive Board, at the presentation of the
figures for the first three quarters on Tuesday. "However, the development
of the exchange rates relevant to us is currently unlikely to change
significantly by the end of the year."
Before changes in the scope of consolidation and exchange rate effects,
consolidated sales were up 4.7% year-on-year after the first three
quarters. On an unadjusted basis, the increase came to 2.7%. Consolidated
sales thus amounted to EUR25.6 billion. Special effects as well as other
non-recurring expenses to strengthen Powertrain's profitability and reduce
future risks totaling EUR334 million were incurred in this division in the
third quarter, mainly in connection with the Hybrid Electric Vehicle (HEV)
business unit. As a result, EBIT declined slightly by 2.7% year-on-year to
EUR2.4 billion as at September 30. This is equivalent to a margin of 9.6%
after 10.1% in the same period of the previous year.
Adjusted EBIT however climbed by 4.4% year-on-year to almost EUR3 billion
in the first three quarters. At 11.5%, the adjusted EBIT margin was up
slightly on its level of 11.3% from the first nine months of 2013.
The Continental Corporation reduced its net indebtedness by more than
EUR1.6 billion year-on-year to EUR2.4 billion as at September 30. Compared
to December 31, 2013, net indebtedness decreased by EUR363 million. The
gearing ratio thus improved to 36.2% at the end of the third quarter. As at
September 30, 2014, Continental had liquidity reserves of over EUR6 billion
in total, comprising cash and cash equivalents of around EUR2 billion and
committed, unutilized lines of credit of over EUR4 billion. Continental
improved its free cash flow by EUR527 million to EUR941 million after the
first three quarters.
"Because for the most part the special effects do not impact cash and
because our systematic efforts to reduce working capital are continuing to
bear fruit, we are raising our forecast for free cash flow before
acquisitions for the year as a whole from more than EUR1.5 billion to more
than EUR1.8 billion," announced CFO Wolfgang Schäfer, adding: "This means
that the free cash flow is almost high enough to cover both the dividend
distributed this year in the amount of EUR500 million and the expenses of
EUR1.4 billion for the Veyance acquisition." Schäfer also indicated that
the pending antitrust authorizations for the Veyance acquisition are still
expected in the fourth quarter.
Net interest expense fell by EUR415 million year-on-year to EUR216 million
in the first nine months. This decrease is due in particular to the
utilization in the previous year of the option for the early redemption of
the four bonds issued in 2010 and their partial refinancing with
considerably lower-interest bonds issued in the second half of 2013. "For
2014 as a whole, we now anticipate net in-terest expense of around EUR300
million," said Schäfer.
Continental reported income tax expense totaling EUR371 million in its
statement of income for the first three quarters. This corresponds to a tax
rate of 16.6% after 12.6% in the same period of the previous year. Income
tax expense was impacted in particular by the recognition of deferred tax
items totaling almost EUR260 million in the U.S.A. and in Germany. These
had not been recog-nized previously and can now be utilized due to the
positive development of earnings. Continen-tal had already posted a
comparable effect in 2013 in relation to the utilization of loss carry
forwards in the U.S.A. For 2014 as a whole, we anticipate a tax rate of
around 20%.
In the Powertrain division, non-recurring expenses of approximately EUR334
million were recognized in the third quarter of 2014. More than three
quarters of these expenses are non-cash items. Roughly one quarter of the
expenses were not corrected in the adjusted EBIT of the Division.
"In taking this step, we are recognizing the losses on existing contracts
as well as reducing future risks. In view of the increasing competition in
the development and production of battery cells for the automobile
industry, we and our Korean partner SK Innovation no longer see any
economic basis in the medium-term for the business operations in our joint
venture. For this reason, the existing activities and investments have
already been reduced considerably," explained Degenhart.
"This has resulted in an adjustment to the carrying amount of the
investment in the joint venture amounting to EUR78 million. In addition,
there were further carrying amount adjustments for assets in the HEV
business unit (EUR58 million) and expenses in connection with an order for
diesel injec-tors. This also prompted us to check pumps based on
technologies from the time before the Siemens VDO acquisition, primarily in
the diesel sector," commented Schäfer, explaining how the non-recurring
special effects in the Powertrain division in the third quarter break down.
In the first three quarters, Continental's capital expenditure on property,
plant and equipment, and software amounted to EUR1.3 billion. This results
in a capital expenditure ratio of 5.1% after 5.4% in the same period of the
previous year. In comparison to the first nine months of the pre-vious
year, Continental increased its research and development expenses by 10.4%
to approximately EUR1.6 billion. This is equivalent to a ratio of 6.4% of
sales after 5.9% one year previ-ously.
As at the end of the third quarter, Continental had 189,361 employees,
around 11,600 more than at the end of 2013. This increase was attributable
to higher volumes, acquisitions and expansion of research and development
in the Automotive Group and additional production capacity, sales channels
and acquisitions in the Rubber Group.
The Automotive Group generated sales of EUR15.5 billion in the first nine
months of the current year. At 7.9%, the adjusted EBIT margin was exactly
at the previous year's level of 7.9%.
In the first three quarters, the Rubber Group generated a slight increase
in sales to almost EUR10.2 billion and once again achieved an adjusted EBIT
margin that was higher than the previous year's level of 17.0% at 17.8%.
Owing to the further decrease in raw material prices, we now anticipate a
positive impact of EUR180 million for the Rubber Group rather than the
previously forecast EUR160 million.
Continental develops intelligent technologies for transporting people and
their goods. As a reliable partner, the international automotive supplier,
tire manufacturer and industrial partner provides sustainable, safe,
comfortable, individual and affordable solutions. In 2013, the corporation
generated sales of approximately EUR33.3 billion with its five divisions,
Chassis & Safety, Interior, Powertrain, Tires, and ContiTech. Continental
currently employs around 189,000 people in 49 countries.
Press Contact
________________________________________
Hannes Boekhoff
Head of Media
Continental AG
Phone: +49 (0) 511 938-1278
Mobile: +49 (0) 170 762 73 26
E-mail: [email protected]
Antje Lewe
Spokeswoman, Business & Finance
Continental AG
Phone: +49 (0) 511 938-1364
Mobile: +49 (0) 160 476 72 60
E-mail: [email protected]
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This press release is available in the following languages: Chinese, Czech,
Dutch, English, French, Ger-man, Hungarian, Japanese, Korean, Portuguese
(Brazil), Portuguese (Portugal), Romanian, Russian, Slovakian, Spanish
Links
________________________________________
Online press portal: http://www.continental-media.com
Financial reports: http://www.continental-ir.com
Online media database: http://www.continental-mediacenter.com
Online video portal: http://videoportal.continental-corporation.com/
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04.11.2014 Dissemination of a Corporate News, transmitted by DGAP - a
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Language: English
Company: Continental AG
Vahrenwalder Straße 9
30165 Hannover
Germany
Phone: +49 (0)511 938-1068
Fax: +49 (0)511 938-1080
E-mail: [email protected]
Internet: www.conti.de
ISIN: DE0005439004
WKN: 543900
Indices: DAX
Listed: Regulierter Markt in Frankfurt (Prime Standard), Hamburg,
Hannover, Stuttgart; Freiverkehr in Berlin, Düsseldorf,
München; Terminbörse EUREX; Luxemburg, SIX
End of News DGAP News-Service
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