Continental AG

Earnings Release • Mar 1, 2012

News Details

Corporate | 1 March 2012 08:49

Continental sets new records and achieves continued fast and profitable growth

Continental AG / Key word(s): Preliminary Results

01.03.2012 / 08:49

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– Sales up 17% to EUR30.5 billion in the company's anniversary year

– Operating result (EBIT) grows twice as fast as sales to EUR2.6 billion / margin of 8.5%

– Adjusted EBIT of EUR3 billion / 10.1% margin

– Earnings per share more than double to EUR6.21 / proposed dividend of EUR1.50

– Net indebtedness reduced to under EUR6.8 billion / gearing ratio 90%

– Outlook for 2012: Sales to rise by more than 5% to more than EUR32 billion

– Net indebtedness to fall below EUR6.5 billion

Hanover, Germany, March 1, 2012. The Continental Corporation set new records in sales, operating results and net income in its anniversary year 2011. In the current fiscal year, the international automotive supplier aims to increase sales by more than 5% while maintaining the high level achieved for the adjusted EBIT margin. 'In 2011 we grew nearly twice as much as the relevant markets in almost all business areas and generated a sales increase of 17% to EUR30.5 billion. At the same time, our operating result (EBIT) increased twice as fast as sales to approximately EUR2.6 billion. We significantly improved our EBIT margin from 7.4% in the previous year to 8.5%. For the first time since 2006, all divisions were in the black again despite of the acquisition-related write-downs that will continue up to and including 2014,' said Continental's Chief Executive Officer Dr. Elmar Degenhart on Thursday at the annual financial press conference in Hanover.

'For the current fiscal year, we expect the corporation's sales to rise by more than 5% to more than EUR32 billion. We are assuming here that global production of cars with a total weight of up to six tons will increase from around 76 million units to approximately 77 million units and that demand on Continental's key replacement tire markets in the NAFTA region and Europe will grow only slightly. At the same time, we aim to match the high level of the adjusted EBIT margin from 2011 in 2012 as well,' said Degenhart. 'In 2011, the year of the company's 140 th anniversary, we generated adjusted EBIT (adjusted in particular for acquisition-related write-downs and special effects) of a good EUR3 billion and a margin of 10.1%, thus exceeding the forecast we issued at the beginning of 2010.'

The Continental Corporation more than doubled its profit, net income attributable to the shareholders of the parent , to a good EUR1.2 billion in 2011. Earnings per share rose from EUR2.88 in the previous year to EUR6.21. 'On this basis, we will propose to the Annual Shareholders' Meeting in Hanover on April 27, 2012 that a dividend of EUR1.50 per share be paid out for fiscal 2011. In relation to the average share price in 2011, this corresponds to a dividend yield of 2.6%. In this way, we wish to allow our shareholders to participate in the company's success,' said Degenhart. The dividend payout ratio relative to the net income attributable to shareholders of the parent is 24.2%.

Chief Financial Officer Wolfgang Schäfer commented that Continental had further reduced its level of debt as announced: 'We have reduced our net indebtedness by another half a billion euros to roughly EUR6.8 billion. Our free cash flow of approximately EUR491 million played an important role here. Overall, we have therefore reduced our net indebtedness by more than EUR4 billion within four years, chiefly as a result of our operational strength, despite considerable negative influences from the financial and economic crisis in 2008/09 and enormous increases in commodities prices, which cost us around EUR1.5 billion in total in 2010 and 2011,' explained Schäfer. 'This year we intend to reach a level of net indebtedness below EUR6.5 billion despite resuming dividend payments. We are planning a free cash flow of more than EUR600 million. Our ratio of net indebtedness to EBITDA (leverage ratio) is currently already 1.6 and is thus at a level of creditworthiness typical for companies classified in the investment grade category.'

In fiscal 2011, the ratio of net indebtedness to equity ( gearing ratio ) improved to 90% at the end of 2011 after 118% at the end of 2010 and 219% at the end of 2009. 'Our next goal is now to get to below 60% in the medium term. We are also aiming for an equity ratio of between 30% and 35%. With equity of a good EUR7.5 billion, we achieved an equity ratio of 29.0% in the past fiscal year, after 25.4% at the end of 2010 and 17.6% at the end of 2009,' said Schäfer. 'We also created value for the second consecutive year. At 16.2%, the return on capital employed ( ROCE ) was not only considerably higher than the previous year's level of 12.4%, but also significantly higher than the cost of capital, which amounts to a multi-year average of around 10% for our company.'

The company's rapid growth is also reflected in the number of employees , which rose by almost 30,000 from 134,000 in the crisis year 2009 to around 164,000 in 2011 – a good 15,000 more than in 2010.

The planned growth is supported by the rapid development and large-scale marketing of innovations. With continued increases in expenses for research and development , the company intends to remain at the forefront: 'We spent EUR1.6 billion on our innovation centers, again roughly 10% more than in the previous year, thus reaching a record level. In relation to sales, this corresponds to a healthy 5.3%, with the Automotive divisions accounting for the lion's share with just under EUR1.4 billion and a ratio of 7.5%. A total of EUR1.7 billion is budgeted for this year,' said Degenhart.

'But it is not only expenditure on research and development that we intend to use to secure our above-average growth. Our rate of capital expenditure also remains high: we invested EUR1.7 billion in property, plant and equipment and software, more than ever before in the company's history. This corresponds to a ratio of 5.6%. In the current year, we will systematically put our growth plans into action with a capital expenditure ratio of over 6%. We are essentially aiming for sales growth that is roughly five percentage points higher than the growth of our reference markets,' explained Continental's CEO.

With sales of EUR30.5 billion in 2011, 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 an expert partner in networked automobile communication. Continental currently has approximately 164,000 employees in 46 countries.

Dr. Felix Gress Senior Vice President of Corporate Communications Continental AG Vahrenwalder Straße 9 30165 Hanover Germany Phone: +49 (0) 511 938-1485 Fax: +49 (0) 511 938-1055 Email: prkonzern@conti.de	Hannes Boekhoff Vice President Media Relations Continental AG Vahrenwalder Straße 9 30165 Hanover Germany Phone: +49 (0) 511 938-1278 Fax: +49 (0) 511 938-1016 Email: corporate-media-relations@conti.de

Media database: www.mediacenter.continental-corporation.com

Financial reports: www.continental-ir.de

Continental Corporation (in EUR millions)	2011	2010
Sales	30,504.9	26,046.9
EBITDA	4,228.0	3,587.6
in % of sales	13.9	13.8
EBIT	2,596.9	1,935.2
in % of sales	8.5	7.4
Net income attributable to the shareholders of the parent	1,242.2	576.0
Earnings per share (in EUR)	6.21	2.88
Research and development expenses	1,608.7	1,450.4
in % of sales	5.3	5.6
Amortization and depreciation 1	1,631.1	1,652.4
– thereof impairment 2	20.4	57.7
Operating assets (as of December 31)	16,198.6	15,282.8
EBIT in % of operating assets (as of December 31)	16.0	12.7
Operating assets (average)	16,019.0	15,580.0
EBIT in % of operating assets (average)	16.2	12.4
Capital expenditure 3	1,711.3	1,296.4
in % of sales	5.6	5.0
Number of employees (as of December 31) 4	163,788	148,228
Free cash flow	490.5	566.9
Net indebtedness	6,772.1	7,317.0
Gearing ratio in %	89.8	118.0
Total equity	7,543.3	6,202.9
Equity ratio in %	29.0	25.4
Dividend per share in EUR	1.50	–
Adjusted sales 5	30,192.7	26,043.0
Adjusted operating result (adjusted EBIT) 6	3,043.0	2,521.1
in % of adjusted sales	10.1	9.7

1 Excluding write-downs of investments

2 Impairment also includes necessary reversals of impairment losses.

3 Capital expenditure on property, plant and equipment and software.

4 Excluding trainees

5 Before changes in the scope of consolidation

6 Before amortization of intangible assets from the purchase price allocation (PPA), changes in the scope of consolidation, and special effects.

End of Corporate News

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Language:	English
Company:	Continental AG
	Vahrenwalder Straße 9
	30165 Hannover
	Germany
Phone:	+49 (0)511 938-1068
Fax:	+49 (0)511 938-1080
E-mail:	ir@conti.de
Internet:	www.conti.de
ISIN:	DE0005439004
WKN:	543900
Listed:	Regulierter Markt in Frankfurt (Prime Standard), Hamburg, Hannover, Stuttgart; Freiverkehr in Berlin, Düsseldorf, München; Terminbörse EUREX; Luxembourg, SIX

End of News	DGAP News-Service

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158867  01.03.2012