Germany's Continental posts euro1 billion Q3 loss

Continental, German auto parts and tire producer, reports euro1 billion Q3 loss, revenue drops

• By Matt Moore, AP Business Writer
• On 9:07 am EDT, Thursday October 29, 2009

FRANKFURT (AP) -- German car parts and tire maker Continental AG on Thursday reported a euro1 billion ($1.5 billion) loss for the third quarter as lower auto sales pinched demand and it booked one-time accounting charges.

The loss in the July-September period compared with a profit of euro2.4 million a year earlier.

The results were hampered by a hefty charge of euro875.8 million as it lowered the value of assets at its automotive division, a move Continental said "cleans up financial risks."

Of the charge, euro61.4 million was applied to its interior division, euro367 million at its chassis and safety unit and euro447.4 million in its powertrain division.

Continental, based in Hannover, said revenue dipped 9.4 percent to euro5.3 billion in the quarter compared with nearly euro5.9 billion in 2008.

Despite the earnings declines, investors sent Continental shares nearly 6 percent higher to euro36.51 in Frankfurt trading.

Privately held Schaeffler Group KG last year took over the much larger Continental just as the world economic downturn began to ravage auto markets. Continental, for its part, took over Siemens AG's car parts business in 2007.

Both Schaeffler and Continental -- which together make one of the world's largest auto industry suppliers -- have been working for months to restructure and stabilize their earnings and debt burdens.

Analysts at M.M. Warburg said they were sticking to their "sell" rating and their target price of euro25.

"In our view, investors should wait for the details of financial restructuring to become more visible before investing into Continental," MM Warburg said in a research note.

"However, Continental and Schaeffler might be interested in seeing higher Continental share prices ahead of the planned capital hike."

Continental has been hit by steep losses this year because of the lingering effect of the global financial crisis on auto makers and buyers.

Auto makers from Ford to BMW to Toyota have scaled back production as consumers retreat from buying new cars, and that has trimmed orders for parts and powertrains and other components that Continental provides.

For the first nine months, Continental reported a net loss of euro1.5 billion compared with a profit of euro363.5 million. Revenue fell to euro14.4 billion from euro19.1 billion in the January-September period of 2008.

Looking ahead, the company said it expects to hold steady "not withstanding persistently adverse economic conditions and lingering uncertainties."

It is also looking at various options for repaying or refinancing loans, with an eye toward a planned capital increase of euro1 billion to euro1.5 billion by the end of the first quarter of 2010.

http://www.conti-online.com

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