* Q1 net profit 227.7 mln euros vs year-ago loss 267.3 mln
* No doubt it can post net profit for full yr
* Raw materials prices could hit results by over 250 mln eur
* Shares outperform European auto sector .SXAP

(Adds comments from CFO and analysts, updates shares)

By Christiaan Hetzner

Continental AG (CONG.DE), the world's third-largest automotive parts supplier, is confident it can post a net profit for 2010, after swinging back into the black in the first quarter, as its markets recover.

One million more cars will be built in Europe and North America than previously forecast, it said on Tuesday, while replacement tyre demand in both markets would outpace expectations as the supplier industry recovers from its worst year since World War Two.

"Even if raw material prices were to increase, we will post a net profit for the full year -- I have no doubt," Finance Chief Wolfgang Schaefer told Reuters after the company published its final first-quarter results on Tuesday.

"We retain a certain amount of caution in view of the possibility that the markets may ease somewhat in the second half, but there are absolutely no signs that a real slump should be expected."

The tyre maker, 75 percent controlled by financially stretched bearings and clutch maker Schaeffler, incurred heavy losses during the past two years due to 2 billion euros ($2.7 billion) in impairment charges after writing down goodwill on its books.

Shares in Hanover-based Continental rose more than 3 percent on the strong results and outlook, before paring gains to trade up 0.8 percent by 1038 GMT amid sector losses .SXAP.

At this year's annual meeting Chief Executive Elmar Degenhart had said only that a net profit was "within sight" after a 1.65 billion euro loss in 2009.

Nevertheless, CFO Schaefer said this did not necessarily mean it would distribute any dividends to shareholders for 2010.

"More likely in 2012 for the business year 2011," Schaefer said in an interview.

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