• Automotive supplier expects a continuing revival in sales and operating results / Further restructuring expenses anticipated
• Sales down 32% to approximately €9 billion in first half-year
• Adjusted EBIT* of €248.7 million after six months

Hanover, July 30, 2009. During the persistent crisis in the automotive sector in the first half of 2009, Continental AG, Hanover, has laid the foundation for continuous improvement in operating results. After posting a clearly positive adjusted EBIT* of €248.7 million in the first six months of 2009, the international automotive supplier expects the revival to continue in the second half of the year. “The entire Continental team has worked hard in recent months, and the results are be­coming more and more obvious. Together, we have achieved an important intermediate goal by returning our operations to profitability in a very difficult market environ­ment. The improvement in the results came primarily from the extensive restructuring and cost-cutting program in the history of Continental. We must and shall hold to the course we have chartered for ourselves," said Continental Executive Board chairman Dr. Karl-Thomas Neumann on Thursday in Hanover. 

Here you can download the press release as a doc-file.

Here you can download the chart "Sales & EBIT, Continental Corporation, June 30, 2009" as a jpg-file.

Here you can download the chart "Sales & EBIT, Automotive Group, June 30, 2009" as a jpg-file.

Here you can download the chart "Sales & EBIT, Rubber Group, June 30, 2009" as a jpg-file.

Here you can download the "Financial Report as of June 30, 2009" as a pdf-file.

Consolidated sales for the first six months of 2009 fell by 31.6% to €9,063.2 million (H1 2008: €13,254.0 million). Before changes in the scope of consolidation and exchange rate effects, sales dropped by 30.2%.  

*Adjusted EBIT: Before amortization of intangible assets from PPA, changes in the scope of consoli­dation, and special effects, including severance payments from the worldwide cost-cutting program in 2009.

Here you can download the chart "Sales & EBIT, Continental Corporation, June 30, 2009" as a jpg-file.

In the second quarter of 2009, consolidated sales fell by 28.0% to €4,761.2 million in compari­son to the same period of 2008 (Q2 2008: €6,614.6 million). Before changes in the scope of consolidation and exchange rate effects, sales dropped by 27.4%. On a comparable basis, there was a decrease of 33.0% in the first quarter. The adjusted consolidated EBIT* was down in the first half of 2009 compared with the same period of last year by €935.0 million, or 79.0%, to €248.7 million (H1 2008: €1,183.7 million), equivalent to 2.8% (H1 2008: 9.2%) of adjusted sales. The adjusted EBIT* fell in the second quarter of 2009 compared with the same period of last year by €318.8 million, or 53.0%, to €283.0 million (Q2 2008: €601.8 million), equivalent to 6.0% (Q2 2008: 9.3%) of adjusted sales. On a comparable basis, there was an adjusted EBIT* of -€34.3 million in the first quarter of 2009. 

In the first half of 2009, the consolidated EBIT was down €1,038.6 million on the previous year to -€126.2 million (H1 2008: €912.4 million), a decrease of 113.8%. The return on sales fell to -1.4% (H1 2008: 6.9%). EBIT in the second quarter was up €38.8 million, exceeding first quarter EBIT by more than €200 million. Net income attributable to the shareholders of the parent was down 226.6% to -€457.1 million (H1 2008: €361.1 million), with earnings per share lower at -€2.70 (H1 2008: €2.23). 

In the first half of 2009, €413.7 million (H1 2008: €731.5 million) was invested in property, plant, equipment and software, corresponding to a capital expenditure ratio of 4.6% (H1 2008: 5.5%). In the first half of 2009 research and development expenses declined by 13.0% compared with the same period of 2008 to €730.6 million (H1 2008: €839.6 million), representing 8.1% (H1 2008: 6.3%) of sales. 

At about €9.75 billion, the net indebtedness of the corporation on June 30, 2009, was ap­proximately €1.23 billion lower than on June 30, 2008, thus falling below €10 billion for the first time since the acquisition of VDO. At the same time, equity was down by €1.78 billion to about €5.24 billion due primarily to goodwill impairments recognized at the end of 2008. This resulted in a poorer gearing ratio (the ratio of total equity to net indebtedness) of 186.1% compared to the ratio on June 30, 2008 (156.4%) despite the lower net indebtedness. 

At -€329.2 million, net interest expense improved by €46.8 million in the first six months of 2009 compared with the same period of last year (H1 2008: -€376.0 million). The improve­ment over the same period of 2008 was due in particular to exchange rate effects, for the most part with no effect on cash, which at €7.6 million were €71.0 million higher than in 2008 (H1 2008: -€63.4 million). In the first half of 2009, free cash flow stood at €689.8 million (H1 2008: €152.8 million), up €537.0 million on the same period of 2008. As of June 30, 2009, Continental had at its disposal liquidity reserves totaling €4,024.7 million, consisting of cash and cash equivalents of €2,000.5 million as well as unused credit lines in volumes of €2,024.2 million.

At the end of the second quarter of 2009, the corporation's employees numbered 130,534, a decrease of 8,621 compared with the end of 2008, which was mainly attributable to the dete­rioration in the general economic environment.  

A glance at the two groups of the Continental Corporation shows, on the one hand, the persistently obvious impact of the global financial and economic crisis that continues to pre­vail. At the same time, however, a substantial improvement in the operating results can be seen. In the Automotive Group, the Chassis & Safety division achieved an adjusted EBIT* of €88.4 million, €87.8 million of which was recorded in the second quarter. The Powertrain di­vision cut its negative adjusted EBIT* in half to -€46.9 million in the second quarter. The Inte­rior division nearly reached the breakeven point in the second quarter with an adjusted EBIT* of -€6.4 million.  

In a persistently adverse market environment, the Rubber Group managed in the second quarter to more than double its first quarter adjusted EBIT* to €382.0 million, with an ad­justed margin of 10.4%.  

The Passenger and Light Truck Tires division achieved an adjusted EBIT* of €296.6 million, €199.5 million of which was recorded in the second quarter. Despite a huge market-driven slump in sales in the second quarter, the adjusted EBIT* of the Commercial Vehicle Tires division reached the breakeven point. The ContiTech division posted an adjusted EBIT* of €98.8 million, €61.4 million of which was in the second quarter. “The key figures again dem­onstrate that Continental’s organization is well balanced and makes strategic sense: Despite the difficult situation, the Rubber Group, which is less susceptible to economic trends on the whole, is posting substantial profits,” reported Dr. Neumann. 

In his outlook for the corporation, Dr. Neumann pointed out that, due to the fragile status at present of the global economy and the financial markets, it continues to be difficult to make a forecast for the remainder of the year. “In view of the considerable reduction of inventories in Europe and North America and the lower base values from the second half of 2008, there are hopes of a revival of business activities in the fourth quarter of 2009 in comparison to the same period of 2008, so that the development of sales and earning in the first half of the year can represent a good basis for the further course of business in 2009. We are therefore as­suming, as things look now, that we will be able to comply with our credit agreements throughout the remainder of the year as well, despite the continuing adverse economic con­ditions and existing uncertainties.” 

At approximately €4 billion at the end of the first half of 2009, the available liquidity from cash and cash equivalents as well as unused approved credit lines exceeded the expected level, but will likely decrease substantially as a result of the August due date for tranche A in an amount of €800 million from the credit facility. “Due to the strong seasonal decrease in net indebtedness at the end of the first half of the year, which is untypical for the business, the goal will be to keep the level achieved stable through the end of the fiscal year.  

Continental is currently looking into various options for the repayment or refinancing of tranche B of our credit facility, which is due in August 2010, with the goal of substantially im­proving the capital structure as well,” Dr. Neumann stressed. 

“Based upon the latest information, we are expecting a continuing revival in sales and oper­ating results in the second half of 2009 compared to the first half. However, the planned plant closures and the announced production adjustments will result in further restructuring ex­penses for the corporation in the coming quarters. As a result of this and other factors, con­siderable deviations can thus still arise in comparison with last year’s figures,” explained the Executive Board chairman.