Continental AG Keeping Its Eyes Open
11 November 1999
Continental AG Keeping Its Eyes Open
Board looking for suitable additions to portfolio
Continental Teves part of Continental family for one year now
Earnings up by almost a fifth in the first nine months
HANNOVER, Germany, Nov. 10 -- Continental AG intends to
continue growing in its role as first-tier supplier to the worldwide
automotive industry. The company is thus on the lookout for expansion
potential both in the tire sector and in the electronics branch, declared
Board chairman Dr. Stephan Kessel at today's press conference in Frankfurt at
which the figures for the first nine months were announced. The financing of
the Teves acquisition and the current development in the corporate earnings
situation show that Continental is poised to move vigorously as it seeks
further additions to its portfolio.
Consolidated sales increased 51.7% in the first nine months to 6.707
billion Euro [$7.21 billion] (compared with 4.422 billion Euro [$5.17 billion]
last year). Without the changes in the scope of consolidation -- in
particular the inclusion of Continental Teves -- sales would have grown by 4.5
percent. Consolidated operating earnings (EBIT) rose 40 percent from 276
million Euro [$322.84 million] to 385 million Euro [$414.11 million].
Consolidated earnings before taxes increased 22 percent to 277 million Euro
[$297.94 million] (228 million Euro [$266.69 million] last year) and
consolidated earnings after taxes 18 percent to 176 million Euro [$189.31
million] (against 149 million Euro [$174.29 million] a year ago).
Kessel, chairman of the Continental Executive Board, and Hans Albert
Beller, likewise member of the Board and management head at Continental Teves
AG & Co. oHG in Frankfurt, declared that the integration of Teves was making
good progress. After one year under Continental's roof, earnings at Teves are
exceeding budget expectations. Both reported on the strategy set for all of
the corporation's business units, that of developing the chassis of the
future. "We are on the way to total chassis management," declared Kessel.
"No one can pursue this goal as well and as quickly as we can."
Hans Albert Beller presented a concrete project: "Continental intends to
be the world's champion as far as brakes are concerned." A production car
converted into a technology demonstrator will be used to provide proof in 2000
that the braking distance can be considerably shortened with Continental
technologies. "We are constructing a 30-meter car." That means the braking
distance will be reduced by around 10 meters for a vehicle traveling at 100
km/h. This represents a clear advance as far as driver safety is concerned.
Finance and human resources boss Klaus Friedland elaborated on the figures
for the first nine months of 1999:
In the first nine months the Passenger Tire Group recorded a sales
increase of 9.3% to 1.825 billion Euro [$1.96 billion] (versus 1.669 billion
Euro [$1.95 billion] last year). Both the OE and the replacement business
were able to make gratifying gains. It was again possible to achieve above-
average growth in volume sales of high-performance tires. Earnings rose again
for controlled distribution although not yet attaining a satisfactory level.
The Passenger Tire Group as a whole improved its operating earnings (EBIT) to
175 million Euro [$188.23 million] (as compared with 167 million Euro [$195.34
million] last year).
On October 18 the group shut down the tire plant in Newbridge, Scotland.
The size of the plant, the product mix and sluggish export activity due to a
strong British pound all had a hand in bestowing on Newbridge the distinction
of being the only passenger car tire plant operating in the red.
The Commercial Vehicle Tire Group boosted sales 23.1 percent to 639
million Euro [$687.31 million] (from 519 million Euro [$607.07 million] a year
ago). Business with the European automotive industry fell shy of last year's
level, while the replacement business showed gratifying increases. All in
all, the Commercial Vehicle Tire Group realized operating earnings (EBIT) of
39 million Euro [$41.95 million] (against 30 million Euro [$35.09 million] the
previous year).
The Continental General Tire Group increased sales 17% to 1.083 billion
Euro [$1.16 billion] (926 million Euro [$1.08 billion] the previous year) --
mainly due to inclusion of General Tire Mexico in the consolidated figures.
The passenger car tire division made solid gains in the OE business, although
replacement business sales were inevitably down slightly due to the long
strike at the plant in Charlotte. The commercial vehicle tire division made
headway in the replacement business while managing to equal last year's level
in the OE business. All told, the Continental General Tire Group realized
operative earnings (EBIT) of 49 million Euro [$52.70 million] and is thus 2
million Euro [$2.34 million] under the previous year's level.
The strike at the Continental General Tire's Charlotte plant was able to
be brought to a close after about a year. The resulting long-term collective
bargaining agreement negotiated for all of the group's unionized plants in the
US ensures efficiency and productivity at lower cost than the US competition
through 2006. 12 million Euro [$12.91 million] was expended to conclude the
strike.
The ContiTech Group increased sales 0.9% to 1.288 billion Euro [$1.39
billion] (versus 1.276 billion Euro [$1.49 billion] the previous year).
Business with the automotive industry grew, with Benecke-Kaliko and the power
transmission and conveyor belt operations experiencing a particularly
spectacular rise in earnings.
The relocation of Vibration Control from the plant in Hannover-Limmer to
Hannover-Stocken has been completed in the meantime and the structural
reorganization of the extrusion operations in Vahrenwald more or less
completed. On the whole earnings grew at a much faster pace than sales, with
the ContiTech Group bettering operative earnings (EBIT) 28% from 79 million
Euro [$92.41 million] to 101 million Euro [$108.64 million].
The Continental Automotive Systems Group achieved sales of 1.880 billion
Euro [$2.02 billion]. Due to the first-time inclusion of Continental Teves in
the fourth quarter of 1998, comparable figures for the prior year are lacking
here. All product lines show gratifying increases in sales. Worldwide its
leading technological standing allowed it to further expand its strong market
position. Prior to goodwill amortization, Continental Teves posted an EBIT of
111 million Euro [$119.39 million]. After goodwill amortization of 50 million
Euro [$53.78 million] operating earnings for the Continental Automotive
Systems Group amounted to 39 million Euro [$41.95 million] (as compared with
15 million Euro [$17.55 million] last year).
At the end of the third quarter 62,856 employees were on the corporate
payroll, 499 more than at the end of 1998. This increase is due mainly to the
inclusion of Continental Matador in Slovakia.
The Board anticipates continued profitable growth in the fourth quarter.
Sales for the year as a whole are expected to increase to around 9 billion
Euro [$9.68 billion] and earnings to advance parallel to sales, as planned.