August 2, 2012 / 7:11 AM / 8 years ago

UPDATE 2-Continental AG raises 2012 targets after strong Q2

* FY sales to rise over 7 pct to more than 32.5 bln euros

* FY adj EBIT margin to exceed 2011 figure of 10.1 pct

* Q3 “stable” and on a par with Q1, Q2-CFO

* Analyst hails “very solid” results

* Continental eyes acquisitions in replacement markets-CFO (Adds background, comments from CFO and analyst)

By Andreas Cremer

BERLIN, Aug 2 (Reuters) - German auto parts and tyre maker Continental AG raised its full-year profit and sales outlook on Thursday, citing easing raw material costs and quarterly results that were much better than the market expected.

Global suppliers such as Continental have been buoyed by export success of German premium car makers BMW and VW’s Audi, benefiting from robust demand in the United States and China.

Global passenger car production may expand to 79 million autos this year from 76 million in 2011, also driven by pent-up demand in Japan, Continental said.

Continental ranks fourth among the world’s biggest tyre makers, trailing Goodyear, Michelin and Bridgestone , the global market leader.

Hanover-based Continental expects group sales to increase more than 7 percent this year to more than 32.5 billion euros ($40 billion). The margin on adjusted earnings before interest and tax (EBIT) is set to exceed the 10.1 percent achieved last year, it added.

Continentals shares traded 3.2 percent higher at 1103 GMT, making it one of the top gainers of the midcap index.

The company previously aimed to boost sales 5 percent to more than 32 billion euros and merely match the 2011 profit margin.

Second-quarter results beat analyst expectations with adjusted EBIT of 948 million euros, fuelled by a 40.3 percent profit surge at the tyre division. The result topped even the most bullish estimate of 910 million euros in a Reuters poll of nine analysts.

“These are very solid numbers,” said Tim Schuldt, analyst at Frankfurt-based Equinet AG, adding Continental was gaining market share in a challenging environment.

Continental’s finance chief Wolfgang Schaefer told Reuters: “Our international presence allows us to benefit from expanding (overseas) markets that help us compensate for developments at auto makers focused on Europe.” He added that he anticipated a “stable” third quarter.

Europe’s deepening debt crisis and slowing expansion of the world economy, however, may cause the pace of business growth at Continental to slow down in the second half of the year, the company said.

European volume auto makers such as PSA Peugeot Citroen , Fiat and General Motors Co.’s Opel division have been engulfed in a protracted sales slump that has squeezed earnings between overcapacity and excessive discounting.

Michelin said on July 27 that first-half net profit rose 37 percent to 915 million euros as price increases helped offset the decline in Europe’s car market and the region’s economy.

Goodyear Tire & Rubber Co. reported a stronger-than-expected net income of $85 million, or 33 U.S. cents per share, for the second quarter on July 31, citing strong demand in North America.

Continental is planning purchases in industrial sectors in coming quarters, Schaefer said, citing business with replacement tyres, electronic replacement parts, rubber and plastics.

“These are potential areas for expansion,” the CFO said. “We want to reduce volatility (of business with original equipment),” he added, without being more specific. ($1 = 0.8132 euros) (Editing by David Cowell)

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