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The Continental Share
Continental share price increases by 62%. Bonds placed successfully.
Continental share listings
Continental AG's shares are listed on the German stock exchanges in Frankfurt, Hanover, Hamburg and Stuttgart. In the U.S.A. they are traded as part of an American Depositary Receipt program on the over-the-counter market. They are not admitted for trading on a U.S. stock market.
The no-par value shares have a notional value of €2.56 per share.
| Continental share data | |
|---|---|
| Type of share | No-par value share |
| Stock exchanges | Frankfurt (Prime Standard), Hanover (NISAX), Hamburg, Stuttgart |
| German securities code number | 543900 |
| ISIN numbers | DE0005439004 and DE000A0LR860 |
| Reuters ticker symbol | CONG |
| Bloomberg ticker symbol | CON |
| Index membership | MDAX Prime All Share Prime Automobile |
| Number of outstanding shares at December 31, 2010 | 200,005,983 |
| American Depositary Receipt data | |
|---|---|
| Ratio | 1:1 |
| ISIN number | US2107712000 |
| Reuters ticker symbol | CTTAY.PK |
| Bloomberg ticker symbol | CTTAY |
| ADR level | Level 1 |
| Trading | OTC |
| Sponsor | Deutsche Bank Trust Company Americas |
62% price increase in course of the year
Year-on-year, Continental's share price was up 62% in 2010 (taking into account the capital increase), listing at €59.14 on December 31, 2010, thereby significantly outperforming the comparable benchmark indexes, the DAX (by more than 46 percentage points) and the MDAX (by more than 27 percentage points). The shares also outperformed the sector index for European automotive and automotive supplier stocks by 19 percentage points.
Share price performance
Automotive cycle and greatly improved key performance indicators have positive influence on share price performance
After 31 million new Continental shares were successfully placed with institutional investors at an average price of €35.93 at the beginning of January 2010, the free float of the MDAX-listed shares increased from 11% to almost 25% with the share price stabilizing at around €40. However, the stock markets were negatively impacted in mid-January 2010 by worries stemming from excessive state debt of eurozone countries such as Portugal, Ireland, Italy and Greece as a result of the financial and economic crisis. The DAX and the MDAX hit their lows for the year on February 5, 2010, of 5,434 points and 7,243 points respectively. Continental's preliminary figures were released on February 23 and were received very well by market players, but Continental shares could not escape the market trend and fell to their year's low of €32.13 on February 25, 2010. Due to a large number of positive analyst recommendations, Continental's share price rose again significantly over the rest of the quarter to end the first three months at €37.55. A broad market recovery began in April due to the positive development of many economic indicators and the resulting expectation of good key performance indicators for the first quarter of 2010. Not only did the DAX and MDAX reach their temporary new high points at the end of April (DAX 6,332 points; MDAX 8,642 points, both on April 26, 2010) but the sector index for automotive and automotive supplier stocks also increased, carried by favorable sales data from automotive manufacturers, to a temporary high for the year of 248 points (April 26, 2010). Increasing speculation regarding a possible default of the Greek government coupled with fears of a repeated destabilization of the European financial system led to significant price losses in the indexes at the beginning of May. The necessary trust amongst market participants was finally rebuilt when the EU Finance Ministers agreed on the EU rescue parachute of €750 billion while the DAX closed at 5,965 points as of June 30, almost the previous year's level. In contrast, Continental's positive figures in the first quarter of 2010 allowed its shares to clearly decouple from the general negative market performance of the second quarter, closing at €42.78 per share as of June 30. Third quarter market performance was influenced by favorable economic data from Europe and Asia on the one hand and worries about the downturn of the U.S. economy on the other. This development was accompanied by more and more intense discussion of the global currency imbalances. In addition to the ongoing debate on the ratio of the Chinese renminbi to the U.S. dollar, the development of the Japanese yen compared with the U.S. dollar prompted the Bank of Japan to make massive currency interventions and drop the Japanese key interest rate to almost 0% at the beginning of October. Unfazed by this development and encouraged by favorable corporate figures, European stock markets recorded substantial gains in the third quarter, but did not quite reach the record highs of the end of April. Continental's third quarter share price reflected the favorable first half results and successful refinancing. For example, from July to September we refinanced a total of €3.0 billion in bank liabilities via the bond market and thus not only reduced our dependency on our main financing instrument, the VDO loan, but also significantly improved the maturity profile of our indebtedness. The share price reacted very positively to this, closing at €57.01 on September 30, 2010. The fourth quarter in the U.S. was marked by the "QE2", the abbreviation describing the U.S. Federal Reserve Bank's $600 billion rescue program to stabilize the upturn of the U.S. economy. This was necessary because the Fed had had only marginal maneuverability in its interest policy since the end of 2009. The European markets reacted very positively to this new rescue program as well until about mid-November 2010, when it became increasingly apparent that, after Greece, Ireland would also be unable to make it without an EU rescue program. The EU Finance Ministers then agreed on the details of a rescue package for Ireland, causing the DAX to exceed the 7,000-points-mark on December 10, 2010, for the first time in two-and- a-half years and to record its high for the year of 7,078 points on December 21. The MDAX reached its high of 10,145 points on December 23. Continental's share price continued to benefit from the good mood on the markets until the beginning of December, recording its high for the year at €66.84 on December 6, 2010. Due in part to bad weather conditions, however, basic raw materials for tire production appreciated so much that the share closed the year at €59.14, far below its high for the year. In particular, the price for natural rubber (TSR 20) jumped by 45% in the fourth quarter alone to over $5.00 per kilogram on December 31, 2010. The price of natural rubber had climbed to $5.78 by February 7, 2011. On September 30, 2010, natural rubber still listed at $3.56 per kilogram.
As of December 31, 2010, the free float market capitalization amounted to around €2.9 billion. The capital increase coupled with the strong price recovery in the year under review meant the Continental shares ranked 4th in the MDAX listings as of the end of the year, therefore improving by 26 places (PY: 30th place). They also occupied 4th position (PY: 13th) in terms of turnover in XETRA trading. The average daily trading volume in 2010 was 537,455 shares.
At the beginning of the new year, the price stabilized at €60 per share and the key data on fiscal year 2010 published by Continental at the beginning of January again received a very positive response from the market.
| March 31, 2010 | in % vs. Dec. 31, 2009 | June 30, 2010 | in % vs. Dec. 31, 2009 | Sept. 30, 2010 | in % vs. Dec. 31, 2009 | Dec. 31, 2010 | in % vs. Dec. 31, 2009 | |
| Continental | 37.55 | 3 | 42.78 | 17 | 57.01 | 56 | 59.14 | 62 |
| DJ Euro Stoxx 50 | 2,931.16 | −1 | 2,573.32 | −13 | 2,747.90 | −7 | 2,792.82 | −6 |
| DAX | 6,153.55 | 3 | 5,965.52 | 0 | 6,229.02 | 5 | 6,914.19 | 16 |
| MDAX | 8,143.46 | 8 | 8,008.67 | 7 | 8,768.03 | 17 | 10,128.12 | 35 |
| DJ EURO Stoxx Auto- mobiles & Parts |
227.46 | −2 | 244.05 | 5 | 285.18 | 23 | 332.13 | 43 |
Earnings per share increase substantially
At December 31, 2010, earnings per share amounted to €2.88 (PY: -€9.76), calculated by dividing the net income for the year attributed to the shareholders of Continental AG by the weighted average of the number of shares in circulation during the fiscal year. An average of 200,005,983 shares were in circulation in the year under review.
Market capitalization in annual average prices (in € millions)
| Key figures per share in € | |||
|---|---|---|---|
| 2010 | 2009 | ||
| Basic earnings | 2.88 | −9.76 | |
| Diluted earnings | 2.88 | −9.76 | |
| Free cash flow | 2.83 | 9.71 | |
| Dividend | – | – | |
| Dividend payout ratio (%) | – | – | |
| Dividend yield (%) | – | – | |
| Total equity (book value) | 31.01 | 24.03 | |
| Share price at year-end | 59.14 | 37.67* | |
| Average share price | 47.12 | 25.47* | |
| Average price-earnings ratio (P/E ratio) | 16.36 | – | |
| High | 66.84 | 42.82* | |
| Low | 32.13 | 11.35* | |
| Average trading volume (XETRA) | 537,455 | 278,992 | |
| Number of shares, average (in millions) | 200.0 | 169.0 | |
| Number of shares at December 31 (in millions) | 200.0 | 169.0 | |
| * Taking into account the capital increase. | |||
| Investments in Continental shares* | |||
|---|---|---|---|
| Initial investment | Jan. 1, 2001 | Jan. 1, 2006 | Jan. 1, 2010 |
| Investment period in years | 10 | 5 | 1 |
| Portfolio growth in € at December 31, 2010 | 42,040 | −15,840 | 22,680 |
| Average dividends in investment period | 7,280 | 5,000 | – |
| Shareholder return p.a. in %** | 14.5 | −3.1 | 62.2 |
| Average returns of comparable indexes in % | |||
| DAX 30 | 0.7 | 5.0 | 16.1 |
| Dow Jones Euro Stoxx 50 | −3.1 | −3.0 | −5.8 |
| *Number of shares: 1,000. **Assuming that the dividend is not reinvested. |
|||
Dividend proposal
A proposal will be made to the Annual Shareholders' Meeting on April 28, 2011, that no dividend be paid for fiscal year 2010. Regardless of this, existing loan agreements would limit total possible distribution to €50 million anyway, corresponding to €0.25 per share. Distributing a dividend was not considered in the two previous years due to the net loss of the parent company.
Common stock increased
The common stock of Continental AG increased by €79,360,000 million to €512,015,316.48 due to the capital increase carried out in January 2010. It is divided into 200,005,983 no-par-value shares. Each share has the same dividend entitlement. In line with Article 20 of Continental AG's Articles of Incorporation, each share grants one vote at the Annual Shareholders' Meeting. There is authorized as well as contingent capital.
Share returns increased
After an increase of more than 30% was recorded for 2009 as a whole, 2010 also saw positive growth. An investment in 1,000 Continental shares at the beginning of the year would have resulted in an increase of €22,680 or 62% in the securities account by the end of the year. An investor would therefore have had excess returns of 46% above the DAX. The investment would still have underperformed if observed over a five year period: investing in 1,000 Continental shares at the beginning of 2006 would have cost an investor around €75,000, but the value of the Continental investment in his security account at the end of 2010 would have been only €59,140, or a performance averaging -4.6% p.a. Dividend payments in this investment period would have also averaged -3.1% p.a., or more than 8 percentage points below the DAX figure. However, the total shareholder return over a ten year period remains 14.5% p.a. – patience pays.
Bonds placed successfully
As part of the refinancing plan agreed at the end of 2009, four bonds totaling €3.0 billion were successfully placed between July and September 2010 on the market for high-yield bonds. All of the euro bonds were issued by Conti-Gummi Finance B.V., Amsterdam, Netherlands, and guaranteed by Continental AG and selected subsidiaries. The bonds are listed on the open market on the Frankfurt, Hanover and Hamburg stock exchanges as well as others. The net revenues from the issues helped the early repayment of the forward start facility that Continental had agreed with its lending banks in December 2009 as well as the partial repayment of the syndicated loan that Continental had taken out in the summer of 2007 to finance the acquisition of Siemens VDO (VDO loan).
As previously stated, this allowed Continental to significantly reduce its dependence on bank loans and again impressively demonstrate its capital market readiness. The key data on the bonds is summarized in the table below.
All four bonds listed above their issue price as at the end of the year. The bond with final maturity of July 2015 put in the best performance, listing at 108.6% at the end of the year or up by 9.7% since its issue. The bond with final maturity of September 2017 (up 4.7% since issue) takes second place, followed by the bond with final maturity of January 2016 (up 3.1% since issue). The bond with a term until October 2018 put in a positive performance of 3.0%.
After successfully refinancing parts of the VDO loan and the significant improvement of its maturity profile, the 5-year credit default swap significantly outperformed the index for securities with a comparable rating. The spread compared with the iTraxx Crossover, the index for securities with a comparable risk profile, was around 120 basis points as of the end of the year.
| German securities identification code | Coupon | Term | Volumes in € millions | Issue price | Price at Dec. 31, 2010 |
| A1AY2A DE000A1AY2A0 |
8.500 % | July 15, 2015 | 750 | 99.0047 % | 108.5818 % |
| A1A1P0 DE000A1A1P09 |
6.500 % | January 15, 2016 | 625 | 98.8610 % | 101.8800 % |
| A1AOU3 DE000A1AOU37 |
7.500 % | September 15, 2017 | 1.000 | 99.3304 % | 104.0150 % |
| A1A1P2 DE000A1A1P25 |
7.125 % | October 15, 2018 | 625 | 99.2460 % | 102.1795 % |
Performance of the bonds
Credit rating virtually unchanged
The leading rating agencies changed Continental AG's credit rating in the year under review as follows:
| December 31, 2010 | Rating | Outlook |
| Standard & Poor's | B | stable |
| Moody's | B1 | stable |
| December 31, 2009 | Rating | Outlook |
| Standard & Poor's | B+ | CreditWatch negative |
| Moody's | B1 | negative |
Despite the recovery of the automotive economic situation in 2010 and the improved business results of Continental, the rating of Continental AG remained virtually unchanged. Standard & Poor's reduced the rating to B, stable outlook, while Moody's improved it from negative to stable. For financing reasons, Continental is sticking to its goal to improve its rating back to the higher credit category, which is characterized by low default rates and referred to as the Investment Grade category, in the medium term. The target minimum rating is BBB and Baa2. By the end of fiscal year 2012 at the latest, the decisive rating ratios of net indebtedness in relation to EBITDA (leverage ratio), net indebtedness in relation to equity (gearing ratio) and the ratio of operating cash flow to net indebtedness (FFO/net indebtedness) as defined by the rating agencies are expected to reach a level characteristic of the investment grade category.
Extensive investor relations activities
A key task of Continental's Investor Relations (IR) is the systematic and continuous dialog with existing and potential investors, stock and credit analysts and other capital market players regarding past, current and especially future business performance. In the process we want to provide all market participants with relevant and useful information at the same time. Our goal is to keep all market participants informed. For this and other reasons, Continental assesses its free float shareholder structure twice a year. The roadshow activities are then geared towards the results of the analyses and are therefore subject to constant change. In addition, the regularly published annual and quarterly reports as well as the Fact Book, which Continental has created this year for the eleventh time, serve to provide an ongoing flow of information.
Despite the low free float in 2009, Continental's IR activities continue to be highly regarded by external market observers as of the beginning of the year under review: as part of a survey by Institutional Investor, we were awarded second place in "Europe's most Successful IR Professionals in the Auto & Auto Parts Sector" by the sell side. In the "Pan European Extel Survey" conducted by Thomas Extel, we placed fourth in the "Best IR Professionals – Auto & Automotive Components" category.
After placing 31 million shares and the accompanying increase in the free float at the beginning of the year, the most urgent task in addition to the routine planning of roadshow activities for equity investors was preparing the market for the upcoming bond issuances. As early as the beginning of the year, non-deal roadshows and participation in conferences for bond investors included establishing contacts with the most important bond investors and credit analysts. At the end of the year, Continental is regularly monitored by at least eight credit analysts who express recommendations for bonds issued by Continental. Continental held a deal roadshow with the chairman of the Executive Board, the chief financial officer and the head of Finance & Treasury to place the first bond. It visited around 250 investors in London, Frankfurt, Paris and Amsterdam.
In the end, Continental placed €3.0 billion on the market for high-yield bonds in the period from July to September 2010. According to the most recent calculations, this corresponds to about 6% of the entire volume placed on the high-yield bond market in the year under review. Bond investors have been a set part of Continental's roadshow activities since the beginning of last year. The company also visited three bond conferences in Europe and one in the U.S. in 2010. In doing so, the IR team works closely with the Finance & Treasury department to ensure a needsoriented flow of information that is tailored to this target group.
Regular monitoring by stock analysts due to the low free float in 2009 fell to fewer than five active observers at times. Over the course of the year under review, this figure rose to 28 and is continuing to climb. Continental is currently actively monitored by 29 stock analysts, who regularly express investment recommendations for Continental shares.
The roadshow activities in the year under review focused on Europe and the U.S. In Asia, a roadshow was also carried out to gauge interest levels in Continental's shares on the Hong Kong and Singapore stock markets in particular. All in all, more than 600 one-on-one meetings were held with investors at the non-deal roadshows, with members of Executive Board personally taking part in half of them. We visited 15 conferences, including ten in Europe, four in the U.S. and one in Asia. After coordinating with the responsible Executive Board members, we also presented the Powertrain and Interior divisions in more detail during field trips.
IR activities also focused on personal contact with our private shareholders, with the dialog centering on the Annual Shareholders' Meeting, which was again well received in 2010. With the support of our shareholder associations, we attempt to take appropriate account of financial services fairs and work with regional stock markets to establish contact with private investors. For example, we contacted around 100 private shareholders in Germany in the year under review.
Interested investors can access the published corporate data, upcoming dates, contact persons and other useful information on the Investor Relations pages on our Internet site at www.continental-ir.com. The Investor Relations team can be reached at ir@conti.de.
The information we provided on the Internet was used much more in 2010 than in 2009: for instance, the number of visits to our IR web pages increased by roughly 53% to approximately 300,000, and the number of downloads by 23% to just under 370,000.
Shareholder structure
Continental AG's largest shareholder is Schaeffler GmbH, which holds 42.17% of the outstanding shares. Private banks M.M.Warburg & CO KGaA and B. Metzler seel. Sohn & Co. Holding AG also each have a 16.48% stake. The free float is 24.87%. A survey of the shareholder structure taken at the end of November 2010 identified around three-quarters of the free float. The findings indicate that around 39% of the identified shares in free float are held by investors in the U.K., Ireland and Continental Europe (excluding Germany). German institutional investors represent about 22% of the identified free float, with North America accounting for about 13%. Approximately one quarter of the identified free float is held by private shareholders or passive investors. 1% of the identified free float is located in Asia.