Profit at Germany's Continental Falls Short of Target

Germany's Continental just missed forecasts with an 8 percent rise in third-quarter operating profit, and said it would issue 14.65 million new shares to help pay for its takeover of Siemens VDO.

The car parts supplier announced in July that it had agreed to buy the Siemens automotive electronics unit for 11.4 billion euros ($16.44 billion), a transformational deal that nearly doubles its sales.

Continental said on Tuesday it would help finance the purchase, which will be largely funded by new debt, through a capital increase of just under 10 percent.

"By taking this step quickly and resolutely, we are removing any speculation about the timing and scope of the capital increase, which is naturally in the interest of our medium and long-term oriented investors," Continental Chief Executive Manfred Wennemer said in a statement.

"We want to give investors a fair opportunity to evaluate the current performance strength of Continental based on our latest quarterly figures as well as the future prospects resulting from the acquisition of Siemens VDO," he added.

Pricing and allocation of the new shares is expected to be completed by Oct 30., the company said.

Earnings before interest and taxes (EBIT) were 426.1 million euros ($614 million) compared with 394.1 million euros a year earlier, Continental said. A Reuters poll of 16 analysts had forecast, on average, an operating profit of 431 million euros.

Sales increased 5.4 percent to 3.9 billion euros in the quarter from 3.7 billion euros, the company said.

Operating profit at its automotive systems was flat at 156.3 million euros.

For the full year, Continental said it expects a further increase in consolidated sales across all divisions and an improvement in EBIT compared with 2006 based on the current corporate structure.

The company reiterated it sees raw material prices stabilising at their high level now.