Continental gains vigor in 2010 and sets new records in sales and operating results
- Automotive supplier increases sales by just under 30% to €26 billion
- EBIT climbs to more than €1.9 billion/margin of 7.4%
- Net indebtedness reduced to €7.3 billion despite increased investments
- Outlook for 2011: 10% sales growth to more than €28.5 billion
- 2011 margin expected to stay at 9.7% of adjusted EBIT despite significant increase in raw material costs
The Continental Corporation gained new vigor in 2010 with record sales and operating results. The international automotive supplier is therefore starting the new fiscal year with a sense of optimism and intends to diligently continue on its growth path with a double-digit growth objective. "With a sales increase of almost 30% to €26 billion in 2010, we clearly surpassed the targets we set at the beginning of the year. After a good start and in light of a production forecast of 75 million passenger cars worldwide, we are striving to increase sales another 10% to more than €28.5 billion this year," said Continental CEO Dr. Elmar Degenhart on Thursday at the Annual Financial Press Conference in Frankfurt/Main."We want to achieve our 2010 adjusted sales margin of 9.7% again in 2011. We are confident that we will achieve this goal although dramatic price increases for natural rubber in particular will negatively impact us with more than €700 million gross in additional raw materials expenses. We are anticipating an average natural rubber price of USD 5.50 per kilogram this year. At the same time, we intend to give strong support to our ambitious growth path with investments of around €1.5 billion," stated Degenhart.
"We have already invested €1.3 billion in 2010 and underlined our efforts. It is all the more remarkable that we noticeably decreased our net debts again to €7.3 billion at the same time.
We have, therefore, cut our net financial debts by more than €3 billion in just two years, and €1 billion of that is from the capital increase we implemented in January of 2010," added Degenhart. "The ratio of net debt to equity is now 118% after 219% at the end of 2009 and could fall below the important 100% mark as early as the end of this year. This development is impressive proof of Continental's high level of performance."
Degenhart noted that 2010 consolidated sales of €26.05 billion exceeded the figure of crisis year 2009 by almost €6 billion. "Our strong growth is also reflected in our increased employee numbers: Continental created roughly 14,000 jobs worldwide in 2010 and counted around 148,000 employees as of the end of the year," said the CEO.
"Our great efforts have paid off. We grew at a faster rate than the recovering automotive markets, especially in the emerging Asian markets," he added. Degenhart referred to the increase in the share of sales of Asia in the automotive business to 21%. Continental increased its sales in Asia at the corporate level by almost 50% to over €4 billion last year.
The corporation's adjusted EBIT (adjusted in particular for acquisition-related amortizations and special effects) amounts to approximately €2.5 billion, while the margin amounts to 9.7%. The EBIT of €1.9 billion is an absolute record and almost €3 billion better than in crisis year 2009. The return on sales amounts to 7.4% (-5.2% in the previous year).
Compared with 2009, the corporation's net income attributable to the shareholders increased by more than €2 billion to €576 million, corresponding to earnings per share of €2.88 after
-€9.76 one year ago. "Despite this positive development, we intend to propose to the Annual Shareholders' Meeting on April 28, 2011 that no dividend be paid for fiscal year 2010," said Degenhart.
The corporation's EBIT was negatively impacted by the interest result of -€697 million. Tax expense also amounted to €592 million, or a rate of 47.8%. The tax rate is expected to remain under 40% in 2011.
"With free cash flow of roughly €567 million, we have once again proven one of Continental's strengths. We generated this cash despite having to increase working capital due to strong growth, despite recognizing cash outflows of around €300 million for restructuring and despite deliberate large investments," emphasized Continental CFO Wolfgang Schäfer. "Our liquidity is also on solid ground. As at the end of 2010, we had €4.2 billion in cash, cash equivalents and unused committed credit lines."
Schäfer announced that the company intends to agree new terms for the VDO loan with a €6.5 billion commitment due next year. "In the negotiations with the banks on the loans due in 2012, we not only want to agree on new terms but also obtain better conditions based on our positive key figures. We are confident that we can successfully conclude the negotiations in short time."
Degenhart pointed out that Continental has strengthened its position as one of the world's leading automotive suppliers in technical terms in 2010 as well and is planning to further increase this: "It is paying off that we spent almost €1.4 billion on research and development even under the most difficult conditions during the crisis year of 2009. Last year it even topped €1.4 billion. This paid off in orders, for instance the Powertrain division acquired orders worth over €7.9 billion calculated over their terms in the past year alone. This is 1.7 times the sales generated in the division in 2010."
Continental Reifen Deutschland GmbH
With sales of €26 billion in 2010, Continental is among the leading automotive suppliers worldwide. As a supplier 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 a competent partner in networked automobile communication. Continental currently employs approximately 150,000 people in 46 countries.