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UPDATE 2-Continental sees more growth for world car markets
March 1, 2012 / 10:21 AM / 6 years ago

UPDATE 2-Continental sees more growth for world car markets

* Says 2012 sales to rise to more than 32 bln euros

* Aims to repeat “high” EBIT margin of 10.1 pct

* Q1 sales may rise to more than 7.9 bln euros (Adds raw material costs, earnings details)

HANOVER, Germany, March 1 (Reuters) - German auto parts and tyre maker Continental AG forecast sales would rise more than 5 percent this year to more than 32 billion euros ($43 billion) as Asian and North American demand offsets a weaker Europe, keeping the global car market growing.

Continental expects global auto production to rise 1 percent to 77 million vehicles this year, the company said on Thursday.

It also aims to maintain its operating profit margin of 10.1 percent, compared with 9.4 percent at the world’s No. 2 tyremaker, Michelin SCA.

“We aim to grow faster than our key markets,” Chief Executive Elmar Degenhart said at a news conference at the company’s headquarters in Hanover, northern Germany.

Degenhart said he expected first-quarter sales to rise to more than 7.9 billion euros from 7.3 billion a year earlier.

Strong demand for vehicles in China and the U.S., the world’s two biggest auto markets, is spurring profits at German car makers and parts suppliers, compensating for sacrifices in Europe. Auto production in the 17-member euro zone may shrink 5 percent to 19 million units this year, Continental said.

Michelin raised its 2015 profit goal last month, encouraged by demand from European and U.S. truckmakers and a strong market for the outsized tyres used in the mining industry.

Degenhart also said the newly formed global alliance between General Motors Co and PSA Peugeot Citroen may enable Continental to win more business as it counts the French group, Europe’s second-biggest carmaker, among its top 10 global customers.

“We believe we can extend our footprint in a joint partnership between GM and PSA,” the CEO said, noting that the world’s biggest car maker ranks among its top three global customers. “It’s a good move for the supplier base.”

Continental’s fourth-quarter earnings before interest and tax (EBIT) rose 18 percent to 680.2 million euros, more than the 654 million euro average estimate in a Reuters poll. Global sales rose 17 percent last year to 30.5 billion euros.

The improvement came despite “negative influences” from slowing economic growth in Europe, where Continental earns most of its sales, and rising raw material prices, the CEO said.

The burden from rising costs of raw materials including synthetic rubber and rare earths may total about 250 million euros this year.

Shares of Continental were up 1.3 percent at 69.24 euros as of 1305 GMT.

Volkswagen AG, the region’s largest carmaker, last week posted an unexpected drop in fourth-quarter operating profit, reflecting a weakening of European demand and upfront costs for a new production system designed to boost platform-sharing.

Continental said last week it would pay its first dividend in four years at a higher than expected 1.50 euros per share. The company last paid a dividend - of 2 euros - for 2007, before the global financial crisis eroded demand for autos and led to two years of losses.

The auto parts maker reduced net debt by more than 4 billion euros over the past four years to about 6.8 billion euros in 2011 and is aiming for less than 6.5 billion euros of net debt in 2012, it said.

Degenhart said there were no talks between Continental and its biggest shareholder, German roller-bearing maker Schaeffler Group, to merge the two companies. Schaeffler, which directly controls 49.9 percent of Continental, racked up about 12 billion euros of debt from purchasing its stake in 2008. ($1=0.7476 euros) (Reporting By Andreas Cremer; Editing by Greg Mahlich and Helen Massy-Beresford)

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