Mixed Fortunes for Michelin in First Half
In general, tyre markets were down, says Michelin, and the company was only able to achieve a stable (+0.7 per cent) operating income of 687.3 m euros by a combination of rigorous cost control and maintaining a good price mix. The positive effect of the price mix was estimated at 324 m euros.
Looking at the world markets for passenger car and light truck tyres, the European OE and replacement markets were down 0.9 and 0.8 per cent respectively, compared to 1H 2004. Michelin’s replacement sales decline exceeded the market figure, while the group’s OE sales fared better. One positive point was that the product mix improved, with a growth in the V, Z and 4×4 sectors.
In North America, the car and light truck replacement market was up 3.3 per cent in 1H, with Michelin claiming group sales in excess of this figure, again with an improved product mix. By contrast, the OE market was down 2.3 per cent, with Michelin sales falling as its main customers lost market share.
In Asia, there was a sharp contrast between the various markets, with sales down in Japan and booming in China. Michelin sales in China increased at “a very fast pace” and “registered market share gains”, according to the company.
Overall, Michelin’s sales volumes in the passenger car and light truck OE and replacement markets worldwide were down 4.9 per cent.
Mixed news for truck tyres
Looking at the truck tyre sales, the European replacement market showed a sharp fall of 8.2 per cent, reaching a five-year low. Michelin’s sales were slightly lower than the market. For the OE market, it was a different story, with 1H truck tyre sales up 10.6 per cent, due mainly to buoyant truck exports. Michelin’s OE sales volumes were down, but the company said that this was in line with its policy of balancing OE and replacement sales and that profits were up. Michelin still remains the number one supplier on the European truck tyre OE market.
There was a similar story in North America, where the replacement market rose 1.2 per cent and the OE market was up 17.4 per cent. Michelin’s US sales were stable, while sales in Canada and Mexico outperformed the markets. Michelin’s X-One tyre proved a particularly good seller. OE sales were boosted by advance purchases in anticipation of new environmental regulations and Michelin sales were slightly above the market figure.
In China, truck tyre sales are growing steadily, although much of the demand is for entry-level products – a sector in which Michelin is not well represented. Globally, Michelin’s truck tyre sales volumes fell by 3 per cent in 1H 2005.
Speciality success
Perhaps the biggest surprise arising from the Michelin figures was the performance of the speciality activities division (earthmover, agricultural, aircraft and two-wheeler tyres, plus maps and guides). While some analysts had been predicting a double-digit, million euro loss, this division turned in a profit of 93 m euros on a turnover of 1.01 bn euros. Part of this was down to the divestment of the loss-making wheel business, but there was strong growth in the earthmover, two-wheeler and aircraft tyre sectors.
For agricultural tyres, the European market declined, but Michelin gained market share in the North American agricultural segment.
Michelin is increasing its share of the two-wheeler tyre market, with the replacement markets in both Europe and North America growing fast.
Something that had a negative impact across the board was the seemingly-relentless rise in raw material prices. In 1H 2005, these were 15 per cent higher than 1H 2004, costing Michelin an additional 285 m euros, and company figures show that raw material prices have increased by 51 per cent from January 2001 to June 2005.
The outlook is for more of the same, but Michelin is hoping that the world’s tyre markets will perform slightly better in the second half of the year. Despite this, the company has reaffirmed its strategy of increasing prices and improving the product mix where possible.
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