HANOVER, Germany - German tire and car parts maker Continental AG said on Tuesday it swung to an operating profit that beat expectations in the fourth quarter of 2002 but gave only a cautious outlook for the current year.
The world's fourth-largest tire maker said job cuts and factory closures made in 2001, tight control on investment spending and growing sales of its electronic auto safety systems had all helped it weather a weak economy, although its U.S. tire business continued to make a net loss.
Earnings before interest, tax and amortization (EBITA) for last year as a whole rose to 694.3 million euros ($735 million) from 33 million euros in 2001, while net debt was slashed by more than a quarter to 1.9 billion euros.
"For 2003 we expect the operating result (EBITA) to be at the previous year's level," Continental Chief Executive Manfred Wennemer told a news conference, adding that sales in January and February were above last year's levels.
He said the group's toughest restructuring steps in Europe were now complete, but noted that it was difficult to give a precise forecast for this year because so many of its key carmaking clients had themselves only given vague outlooks.
STRONGER FOURTH QUARTER
The full-year figures implied an EBITA of 147.3 million euros in the fourth quarter, according to Reuters calculations, up from a 277-million-euro loss in the period a year earlier and ahead of expectations of 131 million euros in a Reuters poll.
Continental posted a net profit of 226 million euros for 2002 as a whole compared with a 258 million euro loss the previous year as it closed factories around the world as part of a bid to shift production to low-wage regions.
French rival Michelin, Europe's biggest tire maker, in February posted an 18 percent rise in 2002 operating profit as price increases and cost cuts helped it resist weak markets and unfavourable exchange rates.
Michelin declined to give a firm forecast for the current year, but said it was betting on broadly stable tire markets.
INFRARED BIG BROTHER
Although auto markets on both sides of the Atlantic are weak -- Continental said it expected a moderate decline in car production in Europe and North America this year -- ever higher equipment levels are keeping auto electronics demand buoyant.
The company boasts its electronic braking business is one of its fastest growing segments, and it will shortly launch a cruise control system that uses infrared to warn drivers that they are too close to the car in front.
Wennemer said Continental would continue to dispose of small, low margin areas of business at its ContiTech unit, which makes relatively low-tech parts such as fuel hoses, headrest cushioning, conveyor belts and air spring suspension.
"We shall continue to closely examine all business areas, especially those that are unable to occupy one of the top three positions in their respective markets in the long term," he said.
Continental said it would propose a dividend of 0.45 euros per share for 2002.