UPDATE 2-Continental Q1 oper profit up, debt load rises

(Adds CFO, analyst comments, shares)

By Christiaan Hetzner

FRANKFURT, April 29 (Reuters) - Continental AG (CONG.DE: Quote, Profile, Research) reported that first-quarter underlying operating profit rose 29 percent and reaffirmed its full-year targets a day after French rival Michelin (MICP.PA: Quote, Profile, Research) lowered its 2008 earnings guidance.

Earnings before interest and taxes (EBIT) and accounting effects from its recent acquisition of electronics and parts maker VDO grew to 569.5 million euros ($892 million), the world's fifth-largest auto parts maker said on Tuesday.

"We view these results as a good start for the merged entity, but we are not convinced they are strong enough to convince investors that Continental has cleared all of the integration challenges it faces," Nomura analyst Michael Tyndall told investors in a research note.

Shares in Continental, which in March had at one point halved in value from their all-time high in July the day the VDO deal was announced, closed down 0.6 percent but still outperformed the European autos index .

The group's first quarterly result that fully included consolidated figures from VDO was in line with a mean estimate of 560 million euros from a Reuters poll of 14 analysts.

"Backed by the solid results for the first three months, we are confident that we will achieve our targets for the year," Chief Executive Manfred Wennemer said in a statement.

While most divisions either met or exceeded estimates, its truck tyre business posted a dramatically poor result with an underlying operating margin of just 3.8 percent mainly due to weak sales, prompting Continental to renew its pledge to dispose of it "sooner or later" should returns not improve.