Continental raised its sales forecast on price hikes image

Germany’s tire maker Continental on Friday raised its full-year sales forecast as price increases helped it offset a sharp rise in raw material costs.

In addition, it said it now expected its tires business to incur raw material costs of 850 million euros this year, compared with a previous estimate of 700 million, due to a spike in the price of synthetic rubber after the disastrous earthquake that hit Japan on March 11.

Largely driving this trend is escalating raw material costs, an alarming trend which shows no signs of abating.

“We had previously forecast sales of more than €28.5 billion, but we are now expecting at least €29.5 billion. We are also targeting an adjusted EBIT margin of around 10%, slightly more than the good 2010 figure of 9.7%, said Continental Executive Board chairman Dr. Elmar Degenhart.

Moreover, Continental said that price of butatine ( a chemical used to make synthetic rubber ) rose more than 65 percent compared with the second quarter last year.

According to senior economist Jom Jacob at the Association of Natural Rubber Producing Countries, natural rubber surged to a record high of more than SA$3.50/kg recently, due to tight supply as production in Thailand – the world’s largest producer of the material.

Rival French tire firm rival Michelin, which expects the rise in raw material prices to cost it about 1.8 billion euros this year, also raised its sales forecast on Friday, saying price increases were offsetting higher raw material prices.