German auto parts and tire maker Continental AG raised its full-year sales forecast on Friday as price increases helped it offset a sharp rise in raw material costs.

The Hanover-based group said it now expects 2011 sales of 29.5 billion euros ($42.36 billion), up from a previous forecast of 28.5 billion euros, and an adjusted operating profit margin of about 10 percent.

At present, we do not see any reason why the good development in earnings should be weaker in the second half of 2011 than in the first half, Chief Executive Elmar Degenhart said in a statement.

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.

Continental said it now expects 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 March 11 earthquake and tsunami that hit parts of Japan.

This will create an additional burden for the Passenger and Light Truck Tires and ContiTech divisions in particular in the second half of the year, the company said

It said the average price of butadiene -- a major industrial chemical used to make synthetic rubber -- rose more than 70 percent compared with the second quarter last year.

Continental posted a second-quarter adjusted profit before interest and tax (EBIT) of 749.8 million euros, in line with the average forecast given in a Reuters poll of analysts.

($1=.6963 euros)

(Reporting by Maria Sheahan; Editing by Greg Mahlich)

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