May 7, 2015 / 3:08 PM / 4 years ago

Continental raises outlook as car markets recover

BERLIN (Reuters) - Germany’s Continental (CONG.DE) has raised its profit and sales guidance as auto demand in core European markets keeps growing while raw material prices and the weak euro provide momentum.

Elmar Degenhart, CEO of Germany's Continental AG speaks during the 'International CAR Symposium' in Bochum January 29, 2013. REUTERS/Ina Fassbender

The recovery in western European car markets, where Continental earns about half its revenue, continued in April with car sales up 6.7 percent, according to LMC Automotive.

Continental said on Thursday sales could rise to more than 39 billion euros ($44.31 billion) this year, compared with a previous estimate of 38.5 billion, reflecting positive effects from the weak euro, stable rubber prices and falling oil prices.

The auto parts and tire maker’s adjusted operating margin could again exceed 11 percent this year, finance chief Wolfgang Schaefer told Reuters, while still guiding for the margin to come in above 10.5 percent.

“We are growing faster than the markets,” Chief Executive Elmar Degenhart said. “We expect this positive development to continue.”

Second-quarter business has got off to a “good start,” Schaefer said, citing rebounding auto production in Europe.

Positive effects from foreign exchange developments could boost sales by 1 billion euros while favourable rubber and oil prices may add another 150 million euros, Continental said.

Continental shares were trading up 1.6 percent at 210 euros as of 1424 GMT (10.24 a.m. EDT).

Buoyed by 6.7 billion euros of liquidity reserves cash, Hanover-based Continental also hopes to benefit from acquisitions, especially in non-automotive segments, after concluding the purchase of U.S. rubber company Veyance Technologies this year.

“We are open to purchases,” Schaefer said, though no major deals are planned in coming months.

“If we come across an attractive target, we will study it very closely,” the CFO said, adding during a conference call that the company had looked at possible targets worth more than 2 billion euros.

Continental’s upbeat remarks tie in with a broader trend among auto suppliers.

Leoni (LEOGn.DE), a provider of cables and cable systems to the automotive sector, said on Thursday first-quarter sales rose 9 percent to a record 1.109 billon euros, thanks to rising demand from the car and commercial vehicle sectors in Asia and the Americas.

Earnings before interest and taxes fell 30 percent due to investments affected by pre-production spending on numerous new wiring system projects, Leoni said.

Separately Rheinmetall said earnings before interest and tax rose by 20 percent at its automotive division that makes parts for pistons, engines and plain bearings, helping the group to deliver a forecast-beating operating profit in the first quarter.

Reporting by Andreas Cremer; Additional reporting by Edward Taylor and Patricia Uhlig

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