Michelin Cash Flow Too Slow

In the last few days Michelin’s share price has fallen four per cent, prompting analysts to ask questions about the manufacturer’s cash flow. Deutsche Bank analysts discount suggestions that natural rubber price increases are the main reason for the drop in share price. Instead they agree with bearish predictions that despite 9.2 per cent operating profit margin in 2005, the company isn’t generating enough cash flow. However, future labour cost savings coupled with lower capital expenditure will boost free cash flow generation in the next 2-3 years, the analysts believe.