Michelin Sales Volume Dips

Michelin’s 2005 sales volume growth will be negative for only the second time in 10 years, Deutsche Bank analysts have reported. However, despite this seemingly negative news, the management is said to be aiming for “at least stable” operating profit margins, compared with 2004 (8.7 per cent).

Therefore the company must have improved its cost structure, the analysts report. This means that if volume picks up in 2006 (analysts estimate a +3 per cent improvement) this would lead to “significant leverage of margins.”

Over the last 10 years, Michelin has enjoyed a 2.8 per cent annual volume growth, with only one year of negative volume growth (2001: -2.6 per cent). During that year, operating profit margin dropped from 7.5 per cent to 6.6 per cent as a consequence of this negative volume effect.