Sales up 8% - Above-average improvement in results of 34.5%

Hanover, May 4, 2004. The international automotive supplier Continental AG continued its positive business development in the first quarter of 2004. In the first three months, consolidated sales were up 8 per cent on the prior year before foreign exchange effects and changes in the scope of consolidation. In­cluding exchange rate effects and consolidation changes, sales increased 5.8 per cent to EUR2,986.1 million (2003: EUR2,821.6 million). "Considering that the dynamics of the global automotive industry activity remain restrained, this demon­strates our strong position amongst international competition," according to Manfred Wennemer, Chairman of the Continental Executive Board.

The consolidated operating result or EBIT increased substantially to EUR246.7 million, up 34.5 per cent from last year's figure of EUR183.4 million. The return on sales amounts to 8.3 per cent, compared with 6.5 per cent a year ago. "All di­visions contributed their share," stressed Dr. Alan Hippe, Member of the Execu­tive Board responsible for finance. Consolidated net income after taxes went up 48.2 per cent from EUR87.4 million to EUR129.5 million, with earnings per share rising from EUR0.67 to EUR0.96.

Sales, EBIT and Return on Sales (in millions of euros):

At the end of the first quarter 2004, the corporation's workforce numbered 71,519, up 2,690 on year-end 2003, primarily as a result of consolidating the sensor business in China at Continental Automotive Systems.

The Continental Automotive Systems division increased its sales by 8.6 per cent before foreign exchange effects. Including exchange rate effects, sales rose 4.5 per cent from EUR1,195.2 million to EUR1,249.0 million. The operating result (EBIT) improved by 40.7 per cent from EUR81.9 million to EUR115.2 mil­lion. The return on sales amounts to 9.2 per cent, compared with 6.9 per cent a year ago. Volume gains were recorded especially by the Comfort Electronics and Electronic Brake and Safety Systems units. Positive sales volume trends in Europe and cost-saving programs - especially in North America - led to a nota­ble improvement in earnings.

Sales of the Passenger and Light Truck Tyres division were up 6.8 per cent before foreign exchange effects. Including exchange rate effects, sales in­creased by 2.2 per cent from EUR899.7 million to EUR919.4 million. Its operat­ing result (EBIT) rose 37.3 per cent from EUR 56.9 million to EUR78.1 million. The return on sales went up from 6.3 per cent to 8.5 per cent. Volumes sold to the worldwide automobile industry rose by 12 per cent. Sales figures grew by 8 per cent for the European replacement business, while a drop in sales volumes was recorded in the NAFTA region. Business in the NAFTA region developed in line with the internal goals. The very good business in Europe more than made up for the losses there. Higher prices of materials and additional social welfare expense in the USA impacted earnings.

The Commercial Vehicle Tyres division boosted its sales by 9.9 per cent, disre­garding foreign exchange effects and changes in the scope of consolidation re­sulting from the acquisition of Continental Sime Tyre. Including these effects and changes, sales went up 20.0 per cent to EUR339.3 million, compared with EUR282.7 million a year ago.

The operating result (EBIT) rose from EUR11.0 million to EUR13.0 million, rep­resenting an 18.2 per cent increase. The return on sales fell slightly from 3.9 per cent to 3.8 per cent. In Europe, total volume sold to the vehicle manufactur­ers and to the replacement market increased by 9 per cent. A 5 per cent gain was recorded for sales volumes in the NAFTA region. There was a large in­crease in deliveries to the automobile industry as well as a slight rise in sales volumes in the replacement business. As in the Passenger and Light Truck Tyres division, the higher cost of materials and additional social welfare expense in the USA had an adverse affect on earnings in this division as well.

The ContiTech division's first-quarter sales in 2004 were up 8 per cent on the comparable three-month period of 2003 before foreign exchange effects. In­cluding exchange rate effects, sales rose 7.8 per cent from EUR 459.4 million to EUR495.2 million. ContiTech improved its operating result (EBIT) from EUR41.1 million to EUR48.3 million, a 17.5 per cent rise, bringing its return on sales up from 8.9 per cent to 9.8 per cent. Six business units achieved significant gains, while Benecke-Kaliko and Elastomer Coatings just barely surpassed their levels for the first quarter of 2003.

Continental AG announced plans to issue a convertible bond of Euro 350 million with a greenshoe option of up to Euro 50 million. The convertible bond will be issued by Conti Gummi Finance B.V. and will be guaranteed by Conti­nental AG.

Continental is issuing the convertible bond to replace the existing convertible bond that will be redeemed in fall 2004 and to benefit from the attractive finan­cing opportunity available in the current convertible market. Furthermore, the proceeds of the issue will be used to support the long-term strategy of Conti­nental AG.

The bond has a maturity of seven years and cannot be called for the first five years of the term of the security. Thereafter, the issuer can call the convertible provided that the Continental Xetra-Quotation exceeds 130 per cent of the con­version price over a certain period of time. Final pricing is expected to occur la­ter today.

Application will be made for the bond to be listed on the Luxembourg Stock Ex­change. The convertible will be marketed to institutional investors outside the United States, Canada, Italy, and Japan only. Morgan Stanley Bank AG and Ci­tigroup will act as Joint Bookrunners and Morgan Stanley Bank AG and its agents will be Stabilisation Manager for the offering (Stabilisation/FSA and German law).

Looking forward, Wennemer said "We anticipate that total passenger car pro­duction this year will remain at the level of 2003, and that truck production will rise slightly in Western Europe and increase strongly in the NAFTA region." Price pressure will continue, especially in the USA. "For 2004 as a whole, we are expecting a further increase in our consolidated sales and operating result before potential restructuring costs in North America."