Third Quarter Results Released By Michelin

Third quarter results from Michelin are stronger than expected with revenues growing by 16.4% to 3,916 Euro against a forecast rise of 4%. Primary contributors to the year on year increase were exchange rates and volume growth.

The Firestone recall helped with Michelin gaining an extra 1 million units. European volume slowed but winter tyre sales appear to have had a good start, up 14.1% in September.

The key points are that third quarter revenues were 12% better than forecast; sales trends are increasing management confidence. It is believed that rising raw material costs and declining US output schedules will result in margins trending towards a “worst case” margin of 7.3%.

Michelin expect North American output (down 29% in third quarter) to continue to decline into the fourth quarter. Price increases are expected to offset raw material costs starting in 2001. These will be implemented in the final quarter.

A 2% increase in European truck tyre prices appears to be sticking and other price increases will be effective from November, with 4% increases in replacement car tyres in Europe. The question is, will the increases stick? Economics say they must, just to cover rising material costs..