Continental Group Sales and EBIT

In response to the rubber group's performance in the first half of the year, Dr. Degenhart explained: “The sales of tires of the Continental Group and the ContiTech division grew by more than 9%, which also includes the merger of the ContiTech division from March this year. Performance of the Hornschuch Group: In terms of revenue, due to the substantial increase in raw material costs, the negative impact on the profitability of the rubber group in the first half of the year reached 300 million euros, and the growth resistance faced by the Tire and ContiTech divisions has increased.” But Dr. Degenhart It is believed that the trend of rising prices of natural rubber and synthetic rubber will fall back in the second half of the year. On the whole, the Continental Group estimates that the amount of negative impact that was negatively affected by the end of the year will reach 450 million euros, which is 50 million euros less than the amount forecast at the beginning of the year.

Dr. Degenhart believes that the performance in the first half of the year confirms the forecast for the current fiscal year: “The Continental Group will reiterate its earnings outlook and we are very pleased to use the growth momentum of the automotive business to drive the Group’s sales growth. We believe that the Rubber Group will make profits in the second half of the year. The contribution will be higher again than last year." In Dr. Degenhart's view, the market environment is extremely challenging. He added: “Economic and political uncertainties greatly influence the market activities. In recent years we have further improved our flexibility and flexibility. This has given us tremendous benefit now.”

1 Changes in the scope of adjustment after adjustment.

2 Adjust the depreciation of intangible assets in the PPA, changes in the scope of the consolidation, and special expenses.

3 Interns are not counted.

Chief Financial Officer Wolfgang Schäfer was very satisfied with the steady growth of the company's sales and financial status. Schäfer, explaining the increase in capital expenditures on fixed assets, plant equipment and software, said: “The increase in capital expenditure was mainly due to the strong growth of our group.” Capital expenditures in the first six months of 2017 increased by 26% to reach 1.16 billion euros. In the same period last year, the capital expenditure ratio was 4.6%, and this year it reached 5.3%.

The free cash flow before the acquisition in the first half of the year was EUR 531 million, a decrease of EUR 510 million over the previous year. Schäfer explained: “The decrease in free cash flow before acquisition was due to increased investment in R&D, production, and increased working capital due to strong growth of the company. Compared with the same period last year, working capital increased by 300 million euros. In addition, The warranty cost exceeds 120 million euros. However, in 2016 we have recognized this issue and prepared for it.” With regard to the outlook for the current year, he added: “We still determine our pre-acquisition free cash flow target for this fiscal year as About 2 billion euros."

In the first half of 2017, research and development expenses increased by 9.5% over the same period of last year. This ratio is almost equal to the increase in sales. Compared with the total sales, the proportion of research and development funds is similar to the same period of last year, reaching 7.2%.

At the end of the first half of the year, the Continental Group had a net debt of 3.47 billion euros. Compared with the first quarter of 2017, the increase in net debt was mainly due to dividend payment of 850 million euros in FY2016 compared with May 2017. Compared to the end of 2016, net debt increased by 671 million euros. At the end of June 2017, the debt ratio fell to 22.8% (previous year: 25.8%). The property ratio is 41%. As of June 30, 2017, the Continental Group's liquidity buffer funds amounted to 4.9 billion euros, including 1.8 billion euros in cash and cash equivalents, and 3.1 billion euros have been promised but unused credit lines.

As of the end of the second quarter of 2017, the number of employees of the Continental Group exceeded 230,000, an increase of approximately 10,000 from the end of 2016. In the automotive group, the number of employees grew mainly in the production and R&D departments, adding a total of more than 4,700 employees. As the Rubber Group further increased its production capacity, expanded its sales channels and acquired the Hornschuch Group, the number of employees increased by more than 5,600. Compared to the previous year's report date, the total number of employees of the Continental Group increased by more than 15,600.

In the first half of 2017, the automotive group had sales of 13.4 billion euros, and the adjusted EBIT margin was 8.4% (previous year: sales of 12.2 billion euros, adjusted EBIT margin of 8.0%).

In the first half of 2017, the rubber group had sales of 8.6 billion euros, and the adjusted EBIT margin was 15.1% (same period last year: sales of 7.9 billion euros, and the adjusted EBIT ratio was 18.5%).

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