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After a good first quarter in fiscal 2016, the technology company, Continental, is raising its forecast for free cash flow before acquisitions for the year as a whole.
“In the first few months of this year, we again managed to achieve a considerable increase in free cash flow before acquisitions. By the end of the year, this figure is expected to climb to at least 2 billion Euro. We had previously expected a figure of at least 1.8 billion Euro,” said Dr. Elmar Degenhart, Continental’s chairman of the Executive Board, at the presentation of the business figures for the first quarter last week.
In the first quarter of 2016, the automotive supplier, tyre manufacturer, and industrial partner boosted its sales by three percent year-on-year to 9.85 billion Euro. At the same time, net income attributable to the shareholders of the parent rose by 12 percent to 734 million Euro. Earnings per share rose to 3.67 Euro after 3.28 Euro in the same period of the previous year.
As at March 31, the operating result (EBIT) had increased year-on-year by 6.4 percent to over 1 billion Euro. This equates to a margin of 10.6 percent compared with 10.2 percent in 2015.Adjusted EBIT climbed by 8.4 percent year-on-year to 1.1 billion Euro. At 11.3 percent, the adjusted EBIT margin was therefore 0.7 percentage points higher than the level for the first three months of 2015.
“Our strong cash flow enabled us to reduce our net indebtedness in the first quarter of this fiscal year by 459 million Euro to 3.1 billion Euro overall, compared to the end of 2015. The gearing ratio thus came to 23.1 percent. This means we have almost achieved our medium-term goal of getting this ratio below the 20-percent threshold,” explained Chief Financial Officer Wolfgang Schäfer.
Compared with the same period of the previous year, net indebtedness was even 1 billion Euro less. Net indebtedness had increased in the first quarter of 2015, primarily as a result of the acquisition of Veyance Technologies. At the end of the first quarter of 2015, the gearing ratio was still at 33.5 percent.
As at March 31, 2016, Continental had a liquidity buffer of 5.45 billion Euro, comprising 1.7 billion Euro in cash and cash equivalents and 3.8 billion Euro in committed, unutilized credit lines. The revolving credit line of 3 billion Euro concluded in April 2014 (part of the syndicated loan with an originally committed total volume of 4.5 billion Euro) was extended for a further year in April 2016. This financing commitment is now available to Continental until April 2021. The term loan of 1.5 billion Euro included in the syndicated loan was fully repaid early by the end of March 2016.
Interest expense totaled 59 million Euro in the first three months of 2016. “At 34 million Euro, interest expense resulting from bank borrowings, capital market transactions, and other financing instruments was 14 million Euro lower than the prior-year figure. The major portion related to expense of 21 million Euro from the issued bonds,” Schäfer explained. Net interest expense improved by
22 million Euro year-on-year to 34 million Euro in the first quarter of 2016.
In the first three months of the year, Continental invested a total of 398 million Euro in property, plant and equipment, and software. The capital expenditure ratio thus amounted to 4.0 percent after 3.7 percent in the comparative period of the previous year. Continental increased its research and development expenses to fund the start of numerous projects. Compared with the first quarter of 2015, this figure went up by 11.4 percent to 716 million Euro. This corresponds to a ratio of 7.3 percent of sales after 6.7 percent a year ago.
At the end of the first quarter, Continental had 212,417 employees, which is 4,500 more than at the end of 2015. This is attributable mainly to the further expansion of production capacity, sales channels, and research and development.
In the first three months of this year, the Automotive Group achieved sales of 6.0 billion Euro. The adjusted EBIT margin was 7.6 percent.
In the first quarter of 2016, the Rubber Group generated sales of 3.85 billion Euro and increased the adjusted EBIT margin by 3.1 percentage points year-on-year to 17.8 percent.
