Log In | Register
FRANKFURT — German car parts and tire maker Continental AG on Thursday reported a euro190 million ($268 million) loss for the second quarter as the global recession ravaged the auto market, crimping demand for its products.
The Hannover-based company said its loss in the April-June period compared with a profit of euro194 million in the year-ago period.
Sales during the second quarter sank 27 percent to euro4.8 billion from euro6.6 billion.
Continental said, however, that in the first six months of the year it booked positive earnings before interest and taxes of euro249 million, reflecting in part benefits from cost-cutting programs. The company said it expects "the revival to continue in the second half of the year."
The overall results were largely expected as Continental released preliminary earnings on July 20.
"The entire Continental team has worked hard in recent months, and the results are becoming more and more obvious," Karl-Thomas Neumann, the company's chief executive, said in a statement.
"Together, we have achieved an important intermediate goal by returning our operations to profitability in a very difficult market environment. The improvement in the results came primarily from the extensive restructuring and cost-cutting program," Neumann said.
The company said its supervisory board was considering a formal merger between Continental AG and Schaeffler Group KG, which took control of Continental in January.
The combination of the two companies creates one of the world's largest auto parts makers, rivaling the likes of Germany's Robert Bosch GmbH.
However, the deal valued at some euro8 billion means Herzogenaurach-based Schaeffler, which is family owned, incurred heavy debt just as the economic crisis was taking hold. Continental itself held euro9.75 billion in debt at the end of June 2009, largely stemming from its euro11 billion takeover of another German carparts maker, VDO, in 2007.
Schaeffler, which makes ball bearings and other car parts, said earlier this year it needed financial help from the government to see it through "massive difficulties" posed by the global economic crisis since the Continental takeover. The government so far has offered no indication that it will help Schaeffler.
Continental's report Thursday said that its supervisory board, the equivalent of a U.S. board of directors, asked the management board, the equivalent of a U.S. executive board, to assess all aspects of a merger of Continental and Schaeffler. The report said the boards would focus on the financial feasibility, and that "this process is to be completed at the end of July." It provided no further details as to the timing or possibility of a formal merger announcement.
The two companies have already started joint projects however, focusing on their synergies, like initiating joint purchasing agreements.
Shares of Continental finished up 5.5 percent at euro27.11 in Frankfurt.
___
On the Net:
