Munich -- Continental raised its 2014 profitability forecast for the second time this year after lower costs for production and supplies and improving demand for cars helped quarterly earnings gain.
Earnings before interest and taxes, and excluding one-time items, acquisitions and disposal, will amount to 11 percent of the German supplier's sales rather than the 10.5 percent previously forecast, the company said today in a statement. The second-quarter margin on that basis was 11.8 percent.
Continental is targeting a fifth consecutive year of record sales in 2014. The company first lifted its forecast in April, saying that the full-year adjusted Ebit margin would "comfortably" exceed 10.5 percent of sales, versus a previous prediction of at least 10 percent.
Second-quarter adjusted Ebit rose 2.6 percent to 1.01 billion euros ($1.35 billion), Continental said. Profit matched the average of eight analyst estimates compiled by Bloomberg.
The supplier has benefitted as carmakers in Europe slowly begin to sell more vehicles as they recover from a six-year contraction sparked by the global recession. Continental has also followed customers into emerging markets that industry executives predicted would grow faster than its home region. Growth in Asian demand has helped earnings this year at French competitor Faurecia and Japanese car producer Nissan Motor Corp.
"The favorable development of raw material costs as well as continual improvements in efficiency contributed to the more positive forecast," CEO Elmar Degenhart said in the statement.
The company is seeking to outpace broader auto-market gains by focusing on components that enhance driving safety, reduce vehicle emissions and enable in-car communication links.
No large takeovers planned
Separately, Continental’s finance chief, Wolfgang Schaefer, told Reuters in an interview today that the supplier had no plans for further large takeovers in the coming months after agreeing in February to buy U.S. rubber firm Veyance Technologies.
"Do not expect the announcement of another larger takeover in the next months," Schaefer said, adding that Continental, which has further cut net debt and boasts almost 6 billion euros ($8.04 billion) of liquidity, will keep looking for smaller deals in non-automotive segments to curb reliance on volatile car markets.
Schaefer added that third-quarter business to date shows that the company is well on track to achieve its 34.5 billion euro 2014 sales goal despite growing currency headwinds.
The CFO said that the Ukraine crisis was hurting business in Russia but this accounted for less than 1 percent of Continental's total group revenue.
"We do not expect things to recover in the coming months," Schaefer said, noting that first-half car production in Russia had plunged 10 percent.
Bloomberg and Reuters contributed to this report