Schaeffler Group, the roller-bearing maker that aims to merge with Continental AG, reported a second- quarter profit in its first-ever financial report as record car sales in China and a resurgent U.S. market spurred demand.

Net income was 97 million euros ($125 million) compared with a loss of 203 million euros a year earlier, Schaeffler said today. The company is being “conservative” with forecasts that revenue in 2010 will significantly exceed 8 billion euros and that earnings before interest and taxes will be more than 10 percent of sales, Chief Executive Officer Juergen Geissinger said in a Bloomberg News interview in Munich.

Closely held Schaeffler, whose roller bearings are used in the London Eye Ferris wheel, France’s TGV high-speed train and Airbus SAS’s double-decker A380 airliner, is working to reduce debt that financed the 2008 takeover of Continental. The Herzogenaurach, Germany-based company published financial figures and held its first earnings press conference as part of preparations for a possible stake sale to outside investors.

“De-leveraging is a key priority for us,” Chief Financial Officer Klaus Rosenfeld told reporters at a press conference in Munich. “Our financing situation has eased significantly in the first half.”

Continental rose as much as 1.24 euros, or 2.6 percent, to 48.94 euros and was up 2.3 percent as of 3:54 p.m. in Frankfurt. The company has a market value of 9.76 billion euros.

Holding Company:
Schaeffler, which is owned by Maria-Elisabeth Schaeffler and her son Georg, put its operating business and most of the Continental shares in a new holding company on June 28. The companies could begin a merger toward the end of next year and there are no plans to sell any of the two manufacturers’ divisions, Geissinger said, reiterating comments from July.

Schaeffler racked up 12 billion euros in borrowings to buy Continental, with about 5 billion euros owed by the family owners and the remainder by the holding company.

Net debt as of June 30 was cut to 5.9 billion euros from 6.1 billion euros at the end of 2010, the company said today.

Schaeffler aims to reduce the ratio of net debt to earnings before interest, taxes, depreciation and amortization to less than 3 by the end of 2010 from 3.5 on June 30, Rosenfeld said.

First-Half Loss：
Second-quarter Ebit at Schaeffler’s auto-components division jumped to 275 million euros from 40 million euros a year earlier, while the industrial-products unit earned 129 million euros compared with 31 million euros.

Orders from industrial customers are “extremely high” at the moment after the unit lagged behind in the first quarter, Geissinger said.

The first-half net loss was 260 million euros after Schaeffler wrote down the value of its holdings in Continental as a result of the Hanover, Germany-based company’s 1.1 billion- euro share sale in January.Schaeffler spent 287 million euros on interest payments in the first six months.

Continental, Europe’s second-biggest car-parts manufacturer, is working on extending maturities for more than 8 billion euros in debt, which stemmed from the acquisition of Siemens AG’s VDO electronic-components unit in 2007.

High-Yield：
The company, which is also Europe’s No. 2 tiremaker, plans to sell as much as 1 billion euros in high-yield bonds, two people familiar with the matter who asked not to be identified said today. Continental sold 750 million euros in five-year bonds in July in the first of several sales to raise as much as 4 billion euros.

Standard & Poor’s rates Continental’s debt at B, five steps below investment grade. Moody’s Investors Service rates the debt one level higher at B1. High-yield, or junk, bonds are rated below Baa3 by Moody’s and BBB- by S&P.

Hannes Boekhoff, a spokesman at Continental, said today the company is working on additional bond sales. He declined to confirm the amount or timing.

Other News:
Schaeffler Reports Second-Quarter Net Income on Gain in Auto-Parts Sales
New Machine Tools Division Launched by Emerson Bearing
ZKL Rodamientos S.A. Wins Contract for Global Supply of Bearings in Bunge Argentina SA (2010-2011)
Timken to Present at Longbow Industrial Manufacturing and Technology Investor Conference
Bomb Release Mechanism Uses Tristar Bearings
Hubble Telescope Service Mission Featured in ＂Hubble 3D＂ IMAX Movie Aided By Timken® Precision Bearings
Green Innovations at SKF Supporting the Automotive Industry
Continental Cap Hike Causes Schaeffler H1 Net Loss