Press Release
Continental Increases Forecast for Adjusted EBIT
Margin to Around 11% after Good First Half-Year
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Net income rises by 14.2% to €1.3 billion or €6.52 per share
Sales grow 2.1% to €16.9 billion after six months
EBIT at €1.8 billion
Significant reduction of interest burden thanks to improved financing conditions
Hanover, Germany, July 31, 2014. The Continental Corporation is again increasing its earnings
forecast for fiscal 2014 after a good first half-year. “We now intend to achieve an adjusted EBIT
of around 11% instead of minimum 10.5% previously forecast. Because of the good performance in the first half of the year, we now expect free cash flow before acquisitions to exceed
€1.5 billion, having previously anticipated more than €1.2 billion,” said Continental Chairman of
the Executive Board Dr. Elmar Degenhart on Thursday at the presentation of the business figures after the first half of the year.
“The favorable development of raw material costs as well as continual improvements in efficiency contributed to the more positive forecast. As we already indicated when reporting about the
first quarter, however, exchange rate effects will have a strong negative impact on sales in
2014. Instead of €700 million, we are now assuming a negative effect of about €1 billion. We
therefore expect the increase in consolidated sales to be more limited, with sales rising to about
€34.5 billion,” Degenhart explained.
Adjusted for effects related to the scope of consolidation and to exchange rates, consolidated
sales climbed year-on-year by 5.7% in the first half of the year. Before these effects, however,
growth was 2.1%, bringing consolidated sales to €16.9 billion. In the first half-year alone, the
negative currency translation effect was approximately €600 million. Net income attributable
to the shareholders of the parent showed an above-average increase of 14.2% to €1.3 billion.
Accordingly, earnings per share rose to €6.52 after €5.71 in the same period of the previous
year.
As at June 30, EBIT also increased faster than sales and grew by 11% year-on-year to
€1.8 billion. This equates to a margin of 10.7% after 9.8% in the previous year.
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Your contact:
Hannes Boekhoff, phone: +49 511 938-1278
-2In the first half of the year, adjusted EBIT climbed by 10.2% compared to the same period of
the previous year to nearly €2 billion. At 11.6%, the adjusted EBIT margin thus exceeded the
10.8% after the first six months of 2013.
The Continental Corporation reduced its net indebtedness as at June 30 to €4.3 billion. This is
€1.7 billion less than a year ago and also just below the level as at December 31, 2013. The
gearing ratio improved to 42.4% at the end of the first half of the year.
“In the first half of 2014, we were able to reduce net interest expense by €220 million to €141
million, cutting it by more than half,” explained CFO Wolfgang Schäfer. “This was made possible in
part by the better financing conditions featured in the new syndicated loan that replaced our old
one in April 2014 as well as the lowering of the average nominal interest rate of the bonds we issued from around 7.5% to just under 2.9% in 2013,” Schäfer added.
In its income statement for the first half of 2014, Continental reported income taxes totaling approximately €324 million. This equates to a tax rate of 19.4% after 6.6% in the previous year.
“The low tax rate is due to deferred tax assets capitalized that were previously not recognized
and can now be utilized thanks to the positive earnings performance,” explained Schäfer. “Continental posted a similar effect already in 2013 with the utilization of tax loss carry forwards in
the U.S.A. For 2014 as a whole, we expect a tax rate under 25%.”
As at June 30, 2014, Continental had a liquidity buffer of nearly €6 billion, comprising approximately €2 billion in cash and cash equivalents and almost €4 billion in committed, unutilized
credit lines. Continental improved its free cash flow after the first two quarters by €663 million
to €575 million. “The very pleasing development of our free cash flow is due both to the positive
earnings performance and our systematic efforts to reduce working capital,” Schäfer added.
In the first six months, Continental invested €794 million in property, plant and equipment, and
software. The capital expenditure ratio thus amounted to 4.7% after 5.2% in the same period of
the previous year. Continental increased its research and development expenses by 8.8%
compared to the first half of 2013 to around €1.1 billion. This corresponds to 6.3% of sales after
6.0% a year ago.
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Your contact:
Hannes Boekhoff, phone: +49 511 938-1278
-3At the end of the second quarter, Continental had 186,278 employees, representing an increase of some 8,500 in comparison to the end of 2013. This was due primarily to production
launches, the expansion of research and development in the Automotive Group and additional
production capacity, sales channels and acquisitions in the Rubber Group.
In the first six months of this year, the Automotive Group generated sales of €10.3 billion. Before exchange rate effects, sales grew by 6.7% in the first half of the year. At 8.4%, the adjusted
EBIT margin was higher than the previous year’s level of 7.8%.
In the first half of the year, the Rubber Group generated a slight increase in sales to €6.6 billion, achieving an adjusted EBIT margin of 17.5%, which is likewise above the comparative figure of 16.0% for the previous year.
With sales of around €33.3 billion in 2013, Continental is one of the world’s leading automotive suppliers.
As a provider of brake systems, systems and components for powertrains and chassis, instrumentation,
infotainment solutions, vehicle electronics, tires and technical elastomers, Continental contributes to enhanced driving safety and global climate protection. Continental is also an expert partner in networked
automobile communication. Continental currently employs around 186,000 people in 49 countries.
Press Contact
Hannes Boekhoff
Vice President Media Relations
Continental AG
Phone: +49 (0) 511 938-1278
Mobile: +49 (0) 170 762 73 26
E-mail: hannes.boekhoff@conti.de
Antje Lewe
Spokeswoman, Business & Finance
Continental AG
Phone: +49 (0) 511 938-1364
Mobile: +49 (0) 160 476 72 60
E-mail: antje.lewe@conti.de
This press release is available in the following languages: Chinese, Czech, Dutch, English, French, German, 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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Your contact:
Hannes Boekhoff, phone: +49 511 938-1278
-4-
Key Figures for the Continental Corporation
in € millions
Sales
EBITDA
in % of sales
EBIT
in % of sales
Net income attributable to the shareholders of the
parent
Earnings per share in €
January 1 to June 30
2014
2013
16,918.1
16,574.3
2,605.8
2,479.3
15.4
15.0
1,810.1
1,630.6
10.7
9.8
Second Quarter
2014
2013
8,528.0
8,541.0
1,310.0
1,309.9
15.4
15.3
906.9
883.2
10.6
10.3
1,303.8
6.52
1,141.9
5.71
715.5
3.58
700.7
3.50
16,842.9
1,958.3
11.6
16,502.3
1,776.3
10.8
8,487.1
1,005.2
11.8
8,504.6
980.1
11.5
574.8
-88.2
511.3
222.9
Net indebtedness as at June 30
Gearing ratio in %
4,272.8
42.4
6,011.9
68.5
Number of employees as at June 30 3
186,278
174,713
Adjusted sales 1
Adjusted operating result (adjusted EBIT) 2
in % of adjusted sales
Free cash flow
1 Before changes in the scope of consolidation.
2 Before amortization of intangible assets from the purchase price allocation (PPA), changes in the scope of
consolidation, and special effects.
3 Excluding trainees.
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Your contact:
Hannes Boekhoff, phone: +49 511 938-1278