Factibilidad: Rentabilidad y sensibilidad

► From racing bicycles to port cranes: The Tire divi- sion has the right tires for every vehicle.

► The division’s sales increased by 10.9% in 2012 to €9.7 billion.

Continental tires stand for excellent transmission of forces, exceptionally reliable tracking in all weather conditions and high cost effectiveness. We offer the right tires for every application – from passenger cars through trucks, buses and construction site vehicles to industrial vehicles, bicycles and motorcycles. The division produces tires under the brand names of Continental, Uniroyal (except in NAFTA, Colombia and Peru), Semperit, General Tire, Viking, Gislaved, Euzkadi, Sime Tyres, Barum, Mabor and Matador. To supplement Continental’s new tire range, we have included a hot-retreaded and a cold-retreaded line of truck tires under the ContiRe and ContiTread brands. The division has 69 locations in 39 countries. In 2012 its approximately 42,500 employees generated sales of €9.7 billion. The division is divided into six business units:

► Passenger and Light Truck Tire Original Equipment: This business unit represents global business with automobile manufacturers. Continental brand prod- ucts are marketed worldwide and General Tire brand products in NAFTA. We also supply OEMs with our runflat systems that, in the event of a puncture, make it possible to continue driving to the next re- pair shop.

Passenger and Light Truck Tire Replacement Business is divided into the following business units:

► EMEA (Europe, Middle East and Africa)

► The Americas (North, Central and South America)

► APAC (Asia and Pacific region)

In addition to the premium Continental brand and budget Barum brand, which are sold all over the world, it markets the regional brands Uniroyal, Semperit, General Tire, Viking, Gislaved, Euzkadi, Sime Tyres, Mabor and Matador. Our retail tire com- panies with more than 2,500 specialty tire outlets and

franchises are also assigned to EMEA Replacement Business.

► Commercial Vehicle Tires: The core competence of the Commercial Vehicle Tires business unit is eco- nomic mobility in the fields of goods, people, con- struction and services. The products are character- ized by high mileage performance, reliable transmis- sion of forces, and superb fuel efficiency. The busi- ness unit offers truck and bus tires and specialized tires for various applications and service require- ments.

► Two-Wheel Tires: The product portfolio of this busi- ness unit ranges from bicycle tires (city, trekking, mountain bike and high-performance racing tires) to motorcycle tires (scooter, enduro and high-perform- ance road tires). The tires are sold as original equip- ment and as replacement tires.

Distribution of sales

29% of sales in the Tire division relates to business with vehicle manufacturers, and 71% relates to the replacement business.

Our growth prospects

Above all, we meet rising and changing demand with:

► innovative developments in high-performance tires, tires with reduced rolling resistance and compre- hensive service solutions for our customers,

► the expansion of production with a focus on the growth regions (primarily BRIC).

We also intend to achieve further growth in the attrac- tive ultra-high-performance segment (UHP) in particu- lar in the coming years. The ContiPremiumContact™ 5 summer tires and the ContiWinterContact™ TS 850 winter tires launched in 2012 were greeted very posi- tively by vehicle manufacturers and test magazines and completely satisfied our expectations with regard to volume sales.

For commercial vehicle customers, Conti360° Fleet Services, which is based on modular services, was expanded further in the EMEA region in 2012. The range of vehicle fleet services is now offered in 13 European countries via an extensive network of around 2,500 accredited Conti360° partners.

Tire Division: Sales by region

In the APAC region, a new commercial vehicle tire solution – the HYBRID product line – was successfully launched on the market in 2012 in response to the expansion of highway networks in the countries of South-East Asia. In the Americas region, Continental Commercial Vehicle Tires substantially increased its ContiLifeCycle business in 2012. Licensed retreading partners were added in the U.S.A. as well as in Mex- ico, Chile, Ecuador and Brazil. This expansion will con- tinue in 2013.

The Tire division has developed a Vision 2025 on the basis of which global production, sales and service activities are to be balanced more evenly. The €1 billion special investment program launched in 2011 for the construction of new plants is benefiting all of the division’s business units. Furthermore, we are also investing around €350 million per year in the expan- sion of our existing plants in order to adjust our global capacity to demand in the different regions in the long term.

begun in the period under review. This ContiLifeCycle plant will begin production in the third quarter of 2013. The plant in Hefei, China, that began operations in May 2011, was expanded with a bicycle tire produc- tion line in 2012. At our tire plant in Modipuram, India, we began setting up production of radial tires for trucks in 2012. This will be launched at the end of 2013, together with production of passenger and light truck tires.

We are also continuing the expansion of our produc- tion capacity in the U.S.A. The largest investment here is our new tire plant in Sumter, South Carolina, U.S.A., where production will begin in 2014.

The new automated indoor braking analyzer (AIBA), a globally unique tire testing system inaugurated early in November at the Contidrom testing grounds near Hanover, Germany, also supports this growth strategy. With this system, up to 100,000 passenger and light truck, 4x4 and van tires a year can now be tested with

ContiTech Division

► The ContiTech division develops products made from rubber and plastic – products that are individu- ally customized for a wide range of industries.

► The division’s sales increased by 3.6% in 2012 to €3.7 billion.

Engineering green value technologies – for us, this basic idea underlies a strong corporate commitment and technological expertise in the development and use of innovative products. With its high-tech products and systems, ContiTech is a global development part- ner and original equipment supplier to the automotive industry, the mining, printing and commercial vehicle industries, as well as the machinery and plant con- struction, aviation and aerospace, and railway engi- neering industries. Our products have many uses – they are flexible and thermally stable, formable, abra- sion-resistant, reversible and eco-friendly. They lend themselves well to combinations with other materials such as glass, metal and ceramics. We make a sub- stantial contribution to sustainable mobility, energy production and efficiency, health and environmental protection.

The division has 91 locations in 27 countries. In 2012 its approximately 28,200 employees generated sales of €3.7 billion. ContiTech is divided into eight business units:

► Air Spring Systems: This business unit is a leading development partner and manufacturer for self- adjusting air suspension systems. Its components and complete systems are installed in light and heavy trucks, buses, trailers and rail vehicles for vi- bration and level control, or in stationary machines as foundation supports. The unit also offers air actu- ators for industrial pneumatic systems and rubber compensators used in machine and plant engineer- ing.

► Benecke-Kaliko Group: The Benecke-Kaliko Group manufactures high-quality surface materials for vehi- cle interiors and works in a close development part- nership with vehicle manufacturers. Its products are used on instrument panels, door trim panels, center consoles and seats.

► Compounding Technology: The Compounding Technology business unit develops and supplies rubber compounds for internal and external custom- ers. It is reported as an independent unit for the first time in 2012 due to its growing strategic im- portance.

► Conveyor Belt Group: The Conveyor Belt Group manufactures steel cord and textile conveyor belts, special-purpose conveyor belts, conveyor belt ac- cessories and service materials. ContiTech’s con- veyor belts are built for energy optimization and can transport materials both more cost effectively and with a lower environmental impact than conventional conveyor belts.

► Elastomer Coatings: This business unit develops and manufactures innovative printing blankets, coat- ed fabrics and diaphragm materials as well as three- dimensionally engineered products like gas holder diaphragms and flexible tanks.

► Fluid Technology: Fluid Technology, the largest business unit, develops and makes a broad range of hoses, hose lines and line systems for the automo- tive and other industries.

► Power Transmission Group: As a development partner and manufacturer of drive belts and matched components through to complete belt drive systems, the Power Transmission Group offers products and systems used in the automotive indus- try and in machine and plant construction.

► Vibration Control: The Vibration Control business unit is a specialist in noise and vibration control and in sealing technology. It develops and produces a wide variety of elastomer and rubber-metal products such as vibration absorbers, mounting systems, precision molded parts, blow molded parts and plastic components for a broad range of applica- tions.

Distribution of sales

53% of sales in the ContiTech division relates to busi- ness with vehicle manufacturers, and 47% relates to business with other industries and in the replacement market.

ContiTech Division: Sales by region

Our growth prospects

For us, key areas of further growth lie:

► in future-oriented industries and in international markets,

► in the continuing expansion of our presence in China, India, Brazil, NAFTA and Eastern Europe. We see particular growth opportunities in the BRIC countries. We have therefore made a number of stra- tegic investments and acquisitions of companies that have a positive impact on our business.

In Russia, one of the fastest-growing automotive mar- kets, the Fluid Technology business unit is laying the foundations to participate in this success with a new plant in Kaluga, where air-conditioning and power steering lines will be produced starting in late 2013. In China, the Benecke-Kaliko Group is constructing a new production facility at the existing location in

plants in Mexico. The Air Spring Systems business unit has also expanded its capacity in South America to enable it to supply more air springs for commercial vehicles. In the U.S.A., the Fluid Technology business unit has invested in a competence center for the fast- growing plastic lines market. In Brazil, a new plant is also being constructed for hoses to be used in oil production and gas extraction. By doubling the pro- duction capacity of the Power Transmission Group’s plant in Brazil, ContiTech can benefit from the increas- ing requirements of the local automotive industry. We expect stronger growth in Eastern Europe thanks to further increases in our production capacity. For instance, the Fluid Technology business unit has be- gun operations at a Serbian plant for hose lines for the automotive industry. In Nyíregyháza, Hungary, a plant for rubber compounds has started production, strengthening our presence in Eastern Europe and supplying our own plants in the region with high- quality compounds.

Value management

Our operative and financial objectives center around the sustainable enhancement of the value of each individual business unit. This goal is achieved by gen- erating a positive return on the capital employed in each respective business unit. At the same time, this return must always exceed the equity and debt financ- ing costs of acquiring the operating capital. It is also crucial that the absolute contribution to value increas- es year for year. On the one hand, this can be achieved by increasing the return on capital employed (with the costs of capital remaining constant) or by lowering the costs of capital (while maintaining the return on capital employed) over time. The perfor- mance indicators used are operating earnings before interest and taxes (EBIT), capital employed and the weighted average cost of capital (WACC), which is calculated on a weighted basis in proportion to equity and debt capital.

► Operating earnings before interest and taxes are calculated from the ongoing sales process. The fig- ure is the net total of sales and costs plus income from at-equity accounted investees but before inter- est and taxes. Consolidated EBIT amounted to €3.1 billion in 2012.

► Capital employed is the funds used by the company to generate its sales. At Continental, this figure is calculated as the average of operating assets as of the end of the quarterly reporting periods. In 2012, average operating assets amounted to €17.0 billion.

► The ratio between these two calculated values con- stitutes the return on capital employed (ROCE). Comparing a figure from the statement of compre- hensive income (EBIT) with one from the statement of financial position (capital employed) produces a holistic analysis. We solve the problem of the differ- ent periods of analysis by calculating the capital employed as an average figure over the ends of quarterly reporting periods. ROCE amounted to 18.1% in 2012, thus rising for the third year in a row.

► The weighted average cost of capital (WACC) is calculated to determine the cost of financing the capital employed. Equity costs are based on the re- turn from a risk-free alternative investment plus a market risk premium, taking into account Continen- tal’s specific risk. Borrowing costs are calculated based on Continental’s weighted debt capital cost rate. Based on a multi-year average, the weighted average cost of capital for our company is about 10%.

► Value is added only if the return on capital employed (ROCE) exceeds the weighted average cost of capi- tal (WACC). We call this value added, produced by subtracting WACC from ROCE multiplied by average operating assets, the Continental Value Contribution (CVC). By increasing ROCE by 1.9 percentage points, value added was also created in 2012.

► In the long term, enterprise value by our definition will increase only if the CVC shows positive growth from year to year. The CVC rose for the third year in a row in 2012.