UPDATE 1-Continental posts strong earnings, raises outlook


(Adds U.S. pensions, details, background, share price

By Michael Steen

FRANKFURT, Oct 31 (Reuters) - German tyre and car parts maker Continental posted a rise in nine-month core operating profit on Thursday that beat expectations and raised its 2002 profit outlook, sending its shares higher.

But the company, which is coming out of a period of painful restructuring and factory closures, also said it would take charges in the fourth quarter for shortfalls in its U.S. pension fund and poor business conditions in North America.

The company posted nine-month earnings before interest, tax and amortisation (EBITA) of 547 million euros ($538 million), up from 309 million euros a year ago and beating a mean forecast of 473 million euros in a Reuters poll of 14 analysts.

"Continental anticipates a slight increase in sales and, now that the figures for the first three quarters are available, assumes that full year earnings (EBITA) will be considerably above the 2000 level (of 533 million euros)," the firm said.

Continental posted a net loss for 2001 and EBITA dropped to just 33 million euros as it closed factories around the world as part of its strategy to shift production to low-wage regions.

Shares in the company were trading up 4.37 percent at 14.56 euros by 0947 GMT, outperforming the DJ Stoxx European automotive index which was three percent higher.

Continental did not immediately provide a breakdown of its third quarter results.

The results came a day after Goodyear Tire & Rubber Co. , the world's largest tyre maker, said its third quarter net income more than tripled, helped by a strong performance in its European operations and cost-cutting.

At the nine month level, Continental reported a net profit of 217 million euros, up from 44 million a year ago and roughly in line with expectations. Sales rose three percent to 8.484 billion euros.

Like its U.S. peer Goodyear, Continental said business conditions in the United States were poor. It said it would take a 49 million euro charge that would come out of its fourth quarter operating profit in its tyre divisions.

The latest in a long line of companies to have to dip into its pockets to top up pension funds which have been ravaged by declines in world stock markets, Continental said full year net profit could be hit by up to 180 million euros due to shortfalls at its U.S. pension fund.

A Continental spokesman said the company had already paid 150 million euros into the fund in the first half of the year.

The company, which is making efforts to reduce its indebtedness, also said its net debt dropped to 2.414 billion euros at the end of September from 2.681 billion in the first half, putting its current gearing at 135 percent.



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