A Continental tire Continental AG

More Rubber Meets Road: Continental Increases Forecast

The German tire company is targeting an adjusted operating profit of “over 11%”, where previously the target had been set at “around 11%.”

FRANKFURT, Germany — Car parts supplier Continental upped its forecast for 2016 on Wednesday after strong performance in its tires business.

CEO Elmar Degenhart said the group would target an adjusted operating profit of “over 11%”, where previously the target had been set at “around 11%”.

Continental’s net profit in the second quarter grew to 905 million euros ($1.01 billion), up 14% on April-June 2015 and outstripping the 825 million euros ($921.36 million) predicted by analysts surveyed by Factset.

Over the first half of the year, the group achieved revenues of 20 billion euros, for an operating profit as measured by EBIT of 2.29 billion euros ($2.56 billion) — up 6.0% compared with the same period in 2015 — and a 13% increase in net profit to 1.64 billion euros ($1.83 billion). That was largely driven by Continental’s tyres and rubber products division, which enjoyed sales growth and lower raw materials costs than expected, the firm said.

The unit boosted operating profit by 17% compared with the first half of 2015 to 1.4 billion euros ($1.56 billion), on revenues of 7.9 billion euros ($8.82 billion).

Degenhart’s increased target did little to impress investors on the Frankfurt stock exchange, with Continental’s share price among to the worst performers in morning trading with losses of around 1.0%.

Analysts had already been expecting operating profit growth higher than 11% for the year, making the firm’s increased forecast little surprise to the markets.

By contrast, Continental’s revenue growth of 1.6% to 10.2 billion euros ($11.39 billion) in the first half fell short of analysts’ expectations of 10.4 billion euros ($11.61 billion).

Copyright Agence France-Presse, 2016

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