Continental's 3Q profit plunges 99 percent

FRANKFURT, Germany - Auto parts and tire maker Continental AG said Thursday that its third-quarter net profit dwindled to almost nothing despite an increase in sales and said signs of a "drastic" slowdown have become evident. The company lowered its sales forecast and put non-urgent investments on hold.

The maker of brakes, electronics and other auto components, which is being bought by Schaeffler Group KG, earned 2.4 million euros ($3.06 million) in the July-September period — down from 251.5 million euros last year.

Sales, however, rose 51 percent to nearly 5.9 billion euros ($7.5 billion) from 3.9 billion euros.

Hannover-based Continental said sales gains from what it called organic growth and from the consolidation of Siemens' VDO auto parts unit were offset by halting demand for automotive products such as tires as car makers slowed production and consumers held off on purchases.

At the same time, costs related to the 2007 acquisition of VDO in an 11.4 billion euro deal weighed down profits.

"In the first half of the year, the weak market situation in North America was compensated by the favorable economic conditions in Europe and Asia," Chief Executive Karl-Thomas Neumann said in a statement.

"In the last quarter, however, there were drastic signs of slowing in all markets, whereby the dramatic declines in Europe in particular have negatively affected us," he said. "This trend will probably become even stronger, continuing far into 2009."

The company lowered its sales forecast for 2008 to 25 billion euros ($31.9 billion) from 26.4 billion euros ($33.7 billion).

Despite that, shares of Continental were up 5.4 percent to 29.64 euros ($37.85) in Frankfurt trading.

Neumann said Continental was prepared to ride out the financial crisis, but was actively cutting costs to adapt to the trying times — reducing the number of temporary workers, lengthening holiday plant shutdowns and cutting back work weeks.

"Furthermore, we are putting investments that are not urgent on hold," he said.

In the first nine months of the year, Continental earned 363.5 million euros ($464.19 million), down nearly 56 percent from last year's 825.2 million euros. Sales rose 60 percent to 19.1 billion euros ($24.4 billion) from 11.9 billion euros.

The results come a month after automotive parts maker Schaeffler said it held 90.2 percent of Continental's shares.

Herzogenaurach-based Schaeffler makes ball bearings for the industrial, aviation, aerospace and the automotive sectors as well as components for engines, transmissions and drive trains.

Continental makes products including tires, brakes and interiors for cars and trucks. The complete fusion of the two companies would create one of the world's largest auto parts makers, rivaling the likes of Robert Bosch GmbH.

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On the Net:

Continental: http://www.conti-online.com

Schaeffler: http://www.schaeffler.com

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