Conti sees slower growth as global car industry slows
FRANFURT (Bloomberg) -- Continental, Europe's second-largest maker of auto parts, said sales and profitability growth may slow in 2013 as the region's market contraction causes unpredictability for the global car industry.
Continental said sales will rise about 5 percent this year, compared with an increase of about 7 percent in 2012. Adjusted earnings before interest and taxes will "remain above 10 percent" of revenue, versus a 10.7 percent margin last year, the German supplier said in a statement today.
"We shall very likely not quite be able to hold to our tempo in the successful year 2012," as global car production may increase by about 2.5 percent to a "mere" 82 million vehicles this year, CEO Elmar Degenhart said in the statement. There is "still a great deal of uncertainty regarding the course of passenger car production and other of Continental's key sales markets," he said.
Europe's car market was probably at the lowest in almost two decades last year, according to the region's main industry lobby. Automotive executives are forecasting a sixth consecutive contraction for 2013. That contrasts with a possible acceleration in auto sales growth this year in China that the country's carmakers association predicted on Jan. 11.
Revenue at Continental last year totaled about 32.7 billion euros ($43.8 billion), the company said. Sales will exceed 34 billion euros in 2013, it said. The company didn't provide absolute figures for last year's profit, which it's scheduled to publish on March 7.
"The uncertainty that Conti is talking about and the unwillingness to commit to at least flat margins raises question marks over 2013," Erich Hauser, an analyst at Credit Suisse in London, said in a report to clients. The forecast "is pretty conservative for a company that just did 10.7 percent margins and that will benefit from raw material tailwinds in 2013."
Continental, which is also Europe's second-largest tiremaker, has sidestepped the effects of the region's sovereign-debt crisis by following Volkswagen and other German carmakers into growing markets such as the United States and China. The addition of products such as safety sensors, emergency-braking systems and fuel-injection technology over the past decade has given the manufacturer a wider range of high-value parts, while its tire unit has benefited from lower rubber prices.
Chief Financial Officer Wolfgang Schaefer estimated in October that worldwide car production would increase by 2 percent to 3 percent, with demand for technology to improve fuel efficiency and upgrade in-car communications helping Continental beat the global expansion.
The company was restored to Germany's benchmark DAX Index on Sept. 24 following a 45-month absence after industrial- bearing maker Schaeffler AG, the company's biggest investor, gradually reduced its holding, enabling more shares to trade freely. A day after Continental's DAX return, Schaeffler sold another 10.4 percent stake in Continental for 1.6 billion euros to reduce debt.Schaeffler still owns 49.9 percent of Continental's stock.
Continental is also reducing borrowings, which soared because of the 2007 acquisition of the VDO component business from Siemens AG. To that end, the parts maker is working to refinance a syndicated loan maturing in April 2014, scaling back the total "slightly" to 4.5 billion euros, it said in December.
The company, which had net debt of 6.8 billion euros at the end of September, is looking to reduce interest costs with the new loan agreement. "We already came very close to meeting many of our medium- term financial targets in 2012," and "we shall further reduce our indebtedness in the current year," Degenhart said today.Contact Automotive News