Conti suffers from weak tire market

Conti suffers from weak tire market

In addition, the stumbling overseas growth in asia and north america was also allowed to weaken in the third quarter, explained conti. Lower saxony sees black for the passenger car replacement tire business. They expect a much slower recovery than before. As a result, the group is now also more cautious with regard to its sales target. The news was not well received on the stock exchange: conti securities lost well over one percent at times.

Group sales in the first half of the year were virtually stagnant at 16.6 billion euros compared with the first half of the previous year (plus 0.4 percent). Earnings before interest and taxes (ebit) decreased slightly by 1.4 percent to 1.63 billion euros. At the end of the day, however, the group's profit rose sharply by 14 percent to 1.142 billion euros. This was mainly due to the significantly lower tax rate: 7 percent compared with 28 percent previously. In the second quarter alone, net income shot up to 701 million euros (520 million), while adjusted ebit rose slightly to 980.7 million euros.

Sales increased by a good 4 percent to 8.54 billion euros.

Conti is heavily dependent on its home continent, where the group generates more than half of its global sales (55 percent). With a good third of sales, continental's tire business is a very crucial sow. Within this division, 71 percent of sales last year came from the replacement business, where private customers and company car fleets buy new tires. By contrast, initial sales of new automobiles by carmakers accounted for only 29 percent of the total.

In the tire replacement business, conti had initially expected a noticeable boost after a mixed start to 2013 – after the figures had been dumping in the basement for an unusually long period of about a year and a half. Three percent growth for the european market in 2013. "We are now assuming an increase of 1 percent at best," the outlook for the half-year report now reads.

Chief financial officer wolfgang schafer explained: "we can already see that the tire replacement markets are improving. But what we see a little less than before is that we get a very strong increase in the second half of the year. We are now seeing a gradual increase."

Despite all the odds, the dax backer largely holds its forecast – with minimal difference. Instead of "over 34 billion euros" in sales, it is now only "around 34 billion". Schafer justified this with the expected moderate, not strong plus in spare tires. Conti CEO elmar degenhart referred to the improvement in the second quarter, but warned against false hopes: "however, this cannot be seen as a trend reversal." besides the problems in europe, the important pruners asia and north america were allowed to slacken soon.

The latest increase was due to seasonal and mathematical reasons. "The second quarter had more working days than the first quarter and due to the long winter the change from winter to summer tires was postponed. Therefore, the development especially in europe (…) continue to be described as unstable," the balance sheet states.

According to the outlook, the third quarter's revenues are expected to be at the level of the second quarter: 8.54 billion euros. Target is for the final quarter to bring in almost 9 billion euros. "We are already seeing a tendency towards stabilization in europe and further growth outside europe – and we are also seeing that we have won one or two additional orders," said Schafer.

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