“Michelin – The BMW Of The Tyre Industry”

Business newspapers in France and England are commenting on a paper from the french analysts Gaetan Toulemonde and Alexis Boyer both from DB Global Equities are recommending Michelin shares as a clear “buy”. The share price – at about 31 Euros at present – has, according to the analysts, the potential to rise to 50 Euros within 12 months. Michelin is seen by them as “the BMW in the tyre industry” with strong brands and an excellent brand strategy.

It is expected that Michelin will announce in a press conference at the end of February a turnover for 2002 of about 15.7 bn Euro and an operating profit of 1.1 bn Euro.

For this year the company is aiming for a turnover of more than 17 bn Euro and an operating profit of more than 1.2 bn Euro. The stock capitalisation at present is 4.

6 bn Euro.Michelin’s strategy has been focused for years on a significantly improved product mix. 5 years ago 60% of all tyres produced were bread and butter tyres, but this proportion has been improved.

Today, standard tyres account for about 45% and shortly this will come down to 40%. Under the leadership of Edouard Michelin, in recent years the Group has drafted its profit and loss expectations very precisely and has been able to achieve its goals. It is the declared target of the management to increase the operating profit from the current 7 to 7.

5% to 10% from 2005. This is easier said than done and market conditions can change overnight; for example, a possible war with Iraq could lead to much higher oil prices and higher costs for all other raw materials. On the other hand the automotive suppliers are facing in North America extremely fierce competition and the automobile companies General Motors, Ford, and especially Chrysler, are trying to get their suppliers to subsidise them again by forcing them to reduce prices.