German auto parts and tyre maker Continental raises its full-year profitability target after posting forecast-beating earnings in the second quarter. Hayley Platt asks CFO Wolfgang Schäfer what's behind the recent boost.
It's Europe's second-biggest maker of car parts and tyres - and 2016 is already gathering speed. Cheaper raw materials helped boost profits at Continental in the second quarter. Adjusted earnings before interest and tax rose 1.30 billion euros, beating expectations. And the group's CFO says it should be able to benefit from lower commodity prices for the rest of the year at least. (SOUNDBITE) (English) WOLFGANG SCHÄFER, CFO CONTINENTAL AG, SAYING: "We had roughly 100 million in the first half of the year tailwind and we expect for the second half of the year 50 million tailwind. So reduced but still tailwind and not yet the negative impact of a headwind which we then expect for 20017." The extra boost has seen Continental rethink its profitability target for the year. It now sees an operating margin above 11 percent in 2016, slightly more than first estimated, although still down on the 11.8 percent last year. Sales of tyres to the UK are relatively small - less than 4 percent. Still the falling pound post Brexit vote is having some short term effect. (SOUNDBITE) (English) WOLFGANG SCHÄFER, CFO CONTINENTAL AG, SAYING: "We feel this mostly when we import our tyres into the UK. We have already, 2 days ago announced a price increase of around 6 percent to compensate for this additional cost burden on our P&L." It's unlikely to hurt Continental much. It's predicting third quarter growth to continue on a similar road.