FRANKFURT -- Continental AG increased third-quarter operating profit by half due to one-off effects and a strong electronics business, and raised its 2005 profit forecast on Wednesday.
The company said earnings before interest and taxes (EBIT) rose to 450.9 million euros ($541.4 million) as results were flattered by an extraordinary gain of 100.7 million euros from the release of pension and medical liabilities in the United States.
Adjusted for an overall one-off gain of 29.2 million euros when including effects from the disposal of a sealing systems unit and restructuring charges at its ContiTech division, the roughly 420 million in EBIT still exceeded the 345 million euro consensus from the average of 22 analysts polled by Reuters.
The group said it would now achieve an improvement in 2005 sales and operating profit before one-off effects such as the pension release.
Results at Continental's CAS electronic braking system division, where its EBIT margin expanded to 13.3 percent from 9.2 percent a year ago, impressed analysts.
"This is by far the highest margin ever posted by the division and one of the highest we have seen any European auto components manufacturer report in recent memory," Morgan Stanley wrote in a research note, reaffirming its "in-line" rating.
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Alan Hippe, Continental's finance chief, told Reuters that the hit to earnings in 2005 from high raw material prices was moving toward 200 million euros, after 135 million euros in the first nine months. He had previously forecast a negative impact at the top end of a 120 million to 150 million euro range.
Hippe added that he did not expect raw material prices to substantially ease in 2006.
Last year's 0.80 euro dividend per share was set to rise, he said.
Group quarterly sales rose 12.3 percent to 3.43 billion euros, in line with the Reuters poll forecast, while net profit amounted to 324.3 million euros versus an poll estimate of 207 million.
Continental's solid third-quarter report, helped by strong performance at its CAS division, contrasted with the more bleak recent news from the tire sector.
Rival Michelin, the world's largest tire maker, had cut its 2005 profit target following a tougher-than-expected third quarter. Shares in Finland's Nokian Renkaat plunged after it revealed it expected quarterly profit to fall.
Continental had said it is considering cutting 400 jobs and shutting its tire factory in its home city of Hanover, Germany, due to sagging European demand for non-specialty tires.