HANOVER -- German tire and car parts maker Continental AG's fourth-quarter operating profit beat all forecasts and it plans to set records again this year, it said on Thursday.
Earnings before interest and taxes rose by 64 percent to 319 million euros ($413 million) in the December quarter, more than even the most optimistic forecast of the 18 analysts polled by Reuters, which averaged 260 million euros.
Chief Executive Manfred Wennemer on Thursday reaffirmed his target to increase sales and operating profit again this year after posting record results last year.
"We want to continue our record-breaking performance this year," Wennemer said. "We had a good start in the year. First quarter sales and operating profit will be higher than in the previous year's quarter."
"We do not feel that the increases in raw material prices will have any significant effect on the earnings," he added.
For the full year, earnings before interest and taxes rose 28 percent to 1.096 billion euros, broadly in line with management guidance. This included a 104 million euro restructuring charge for its Mayfield, Ky., tire plant.
Sales last year rose 9.2 percent to 12.6 billion euros. The firm's earnings before interest and taxes margin rose to 8.7 percent from 7.4 percent in 2004.
"We want to improve this in 2005," Chief Financial Officer Alan Hippe told reporters, without being more specific.
SPENDING TO RISE
Though its main customers, carmakers, suffer from a flagging auto market, Continental has bucked the underlying trend, relying on a low-cost manufacturing base and a dominant position in the growing and highly profitable market for electronic car safety gear.
Continental predicted as early as last autumn that sales and earnings would hit record levels this year.
Wennemer said the company would continue to invest heavily to maintain its technological advantage over the competition.
"We intend to substantially increase capital expenditure throughout the corporation in 2005, primarily on new technologies for vehicle safety and comfort systems and on the expansion of our production facilities in low-wage countries," he said.
CFO Hippe said he expected capital expenditure of between 6 percent and 6.5 percent of sales, compared with 5.6 percent in 2004.
Nevertheless, Wennemer said net debt and gearing would continue to drop in 2005, after liabilities declined to 695 million euros in 2004 from 1.17 billion euros a year earlier and the gearing ratio dropped to 24.5 percent last year from 58.9 percent in 2003.