Continental AG, Europe’s second-largest auto-parts maker, reiterated financial targets for 2013 as declining raw-material costs and new products make up for a sixth yearly contraction in its home region’s car market.
Sales will rise about 5 percent to exceed $44.7 billion, and adjusted earnings before interest and taxes will amount to more than 10 percent of revenue, the Hanover, Germany, company said Friday.
Continental, also Europe’s second-biggest tire maker, has partly avoided the effects of recession in the region by following German carmakers Volkswagen AG, Bayerische Motoren Werke AG and Daimler AG into growing markets such as China and the United States. It has sustained earnings with a focus on supplying high-end auto manufacturers with technology such as safety sensors, emergency-braking systems and fuel-injection equipment.
“It’s very positive that they’ve confirmed the outlook and see an acceleration in the second quarter,” said Daniel Schwarz, a Frankfurt analyst with Commerzbank. “After declining sales in the first quarter, they need to speed up to meet their sales growth target.”
Continental stock has gained about 4.3 percent this year, valuing the company at $24 billion.
First-quarter earnings before income taxes fell 5.1 percent to $980 million from $1.03 billion a year earlier, Continental said. Revenue declined 3.4 percent to $10.5 billion.
“As anticipated, the first three months of this year were difficult,” Chief Executive Officer Elmar Degenhart said in a separate news release. “However, our business has already regained momentum,” and “we’re confident that global production of passenger cars will continue to stabilize.”
Declines in prices for natural and synthetic rubber will continue to help earnings in the second half of the year, Continental said. Futures for the material have dropped 16 percent this year. The manufacturer expects a $262 million reduction in costs in the first nine months of the year from raw-material price declines, it said in a presentation.
The manufacturer has reduced borrowings since its purchase of Siemens AG’s former car parts unit resulted in net debt of $14.3 billion at the end of 2007. CEO Degenhart said two months ago that the company may be ready for an acquisition of as much as $1.3 billion, probably outside of Europe and independent of the car industry.
Continental eventually plans to increase the nonautomotive share of sales to 40 percent of the total from 30 percent now, Schaeffer said.
No acquisition target is on the agenda, he said. The CFO declined to comment on a Bloomberg report that Continental is among the bidders for Johnson Controls Inc.’s automotive electronics unit.
Schaeffler is still struggling with about $8.9 billion in debt resulting from a limited takeover offer for Continental that backfired amid the financial crisis in 2008 and left the company controlling more than 90 percent of the tire maker’s stock. Schaeffler has since reduced its holding in Continental to 49.9 percent.
The companies are working together in about 30 projects, according to Degenhart.