Continental expecting a 10 percent increase this year thanks to emerging markets

Article by Christian A., on April 28, 2011

Continental AG, a Germany-based manufacturer of tires and brakes, has achieved sales of more than 7.3 billion euros ($10.71 billion), an increase of about a fifth, for the first quarter in 2011. This figure is more than 10 percent better than the Thomson Reuters I/B/E/S consensus.

The company remains on track to hit its 2011 targets with the emerging markets offsetting the increasing prices in rubber as well as fuelling the consensus-busting quarterly sales. In fact, the company still aims to raise its sales by 10 percent for this year to more than 28.5 billion euros with a stable adjusted EBIT margin.

Manufacturers of vehicle units as well as of auto components are relying on the booming markets of China, which is the biggest vehicle market in the world, as well as of Brazil and Russia, while the market growth in Europe remains constant.

Continental is eyeing Asia as a market, CEO Elmar Degenhart announced in the company’s annual shareholders’ meeting on Thursday. In fact, the company has opened a tire factory in the province of Hefei, Anhui in China. Also, it has signed a deal this month to purchase the tire unit of Modi Rubber Ltd., in India so that it can enter into the fast-growing markets there and tap the automotive demand.

According to analyst Jasko Terzic at DZ Bank, there is a possibility that Continental will outperform its goals for this year. He explained that the guidance is “very conservative” after it has had an impressive start into the year.

Last month, the company announced that when prices would reach record highs, it expected natural rubber prices to remove around $1 billion in profits this year if it cannot offset the hit. However, rubber prices have tumbled more than 30 percent since then because of the uncertainties in the outlook due to the March 11 earthquake in Japan, monetary tightening in China and the total global economy.

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