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May 09, 2016 02:00 AM

ContiTech sales grow despite challenging markets

Mike McNulty
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    Hans Juergen Duensing

    HANOVER, Germany—The market has been challenging for companies that serve the mining and oil and gas sectors.

    ContiTech A.G. is one of those businesses. But the firm is also quite versatile and serves numerous other industries.

    So despite difficult economic conditions in key sectors worldwide, ContiTech's sales in 2015 rose 37 percent to $6.1 billion thanks principally to the company's broad portfolio.

    Veyance Technologies Inc., acquired in early 2015, contributed about $1.7 billion in sales to the total.

    EBIT for the year fell to about $194 million from almost $491 in 2014. EBIT was mainly affected by purchase price allocation within the acquisition of Veyance, a spokeswoman said.

    Special effects—such as the plunge of raw material prices—affected the company's industrial hose and conveyor belt business, she said.

    “We must be able to respond flexibly to those changes in conditions,” the spokeswoman said. “Only in this way will we be equipped for the future.”

    That's why the firm implemented restructuring measures, she said.

    ContiTech's adjusted EBIT for 2015 was $440 million compared to $496 million, she said. That equates to 7.2 percent of sales.

    “We are very satisfied with this result,” according to Hans Juergen Duensing, a member of the executive board of parent Continental A.G. responsible for the ContiTech division.

    “The currently strong automotive industry in addition to positive performances in some industrial sectors have provided us with momentum,” he said.

    “This is enabling us to cushion the continuing decline in mining- and oil-dependent business, which accounts for roughly 18 percent of our sales at present. This demonstrates yet again that our broad portfolio puts us in a strategically strong position.”

    Duensing said 2015 was an especially difficult year for the company's mining customers, noting that the sector continues to flounder because commodity prices remain extremely low. Capital expenditures have been cut by more than half in the sector during the last few years, he added.

    In the third quarter, he said, deterioration in the oil industry became a significant factor.

    At the same time, he said, about 51 percent of ContiTech's sales were generated by the growing automotive industry, “largely offsetting any fluctuations.”

    “We made a positive start to fiscal 2016, but we are still expecting a challenging environment for the current year,” Duensing said. “We are working consistently and with a heavy emphasis on the objective of improving our return on sales.

    “The restructuring measures we introduced are expected to strengthen our earnings situation in this respect.”

    In addition to putting a number of cost-cutting measures in place during the last year, the company also invested about $277.6 million in new plants and production expansions globally.

    “We have again reinforced our presence in Asia and North America to be where our customers are and thus meet the growing demand in those regions,” Duensing said.

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