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Continental reports first quarter loss

GERMAN tire and car parts maker Continental AG yesterday reported a loss for the first quarter as sales dropped sharply.

The company had a net loss for the January-March period of 267 million euros (US$352 million). A year earlier, it had a net profit of 167 million euros. Sales for the quarter fell 35 percent to 4.3 billion euros, compared with the previous year's 6.6 billion euros.

However, "based upon the latest information, we are expecting a clear revival in sales and operating results in the second quarter of 2009 compared to the very weak first quarter of this year," Chief Executive Karl-Thomas Neumann said.

Still, he added that, given continuing turbulence on world financial markets, it was difficult to make a precise prediction for the year.

"Our uppermost goal remains that of reducing debt," Neumann said. "We still anticipate substantial free cash flow in 2009. This will be fostered by the suspension of the dividend, substantial cuts in capital spending, and further reductions in fixed costs."

Continental shares rose 5.2 percent to 19.38 euros in Frankfurt trading.

Continental said sales at its car parts business fell 42 percent to 2.52 billion euros in the first quarter, citing production cutbacks at car makers in North America and Europe.

The division posted an operating loss of 266 million euros, compared with an operating profit of 212 million euros a year earlier.

The sales of Continental's tires division fell 22 percent to 1.8 billion euros. Its operating profit was down 56 percent to 113 million euros.

Meanwhile, Continental said it would provide a joint concept for its future cooperation with the Schaeffler Group KG within 100 days.

Herzogenaurach-based Schaeffler took control of Continental in January, creating one of the world's largest auto parts makers.

The family-owned Schaeffler incurred heavy debt from the move, valued at about 8 billion euros, just as the global economic crisis was taking hold.

Schaeffler, which makes ball bearings and other car parts, said earlier this year it needed financial help from the government to see it through its "massive difficulties" posed by the global economic crisis since the Continental takeover. The government so far has offered no indication it will help Schaeffler.


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