Michelin Releases Q1 Sales Results

Michelin’s financial results for the first quarter, to March 31, 2008, show sales of 4.091 billion euros during the period, a decrease of 2.6 per cent year on year at current exchange rates. The company reports that sales results were limited by declines in its European and North American replacement tyre markets, where the Michelin Group has a large footprint. “Michelin’s trading environment was less supportive than initially anticipated,” said Michelin in a press statement. “Most of the mature countries’ tyre markets were down, except for Europe’s original truck tyre market which remained strong. This trend resulted from a weak trading environment that weighed on overall market morale.” This weak performance contrasted strongly with that in emerging markets.

In Europe passenger car and light truck replacement first quarter 2008 markets were sharply down year-on-year. Another dampening effect on reporting period market growth, says Michelin, was a late start to the summer season due to wintry weather in March. Trends varied dramatically, however, in the two main reporting regions of the continent, with Western countries down more than 6 per cent overall, versus 7 per cent growth recorded in Eastern markets. In the Western markets, Germany (-14.6%) and France (-7.4%) experienced the greatest declines. All Eastern countries posted strong growth. Segment mix was further enriched: the entry (S & T) tyre segments were down more than 5 per cent at the end of March, and the high performance V & Z (+ 2.5%) and SUV (+ 4.6%) segments grew strongly.

The replacement truck tyre markets recorded what Michelin has called a ‘bearish’ first quarter overall: a sharp decline of – 9.1 per cent in Central Europe and – 6.8 per cent in Western Europe, but a substantial 30 per cent growth in Russia. These same markets posted strong growth during the first quarter 2007 versus the same period in 2006, creating an unfavourable basis effect, notes Michelin.

Original equipment passenger car and light truck tyre markets in Europe posted moderate year-on-year growth, again thanks to the dynamism of Eastern Europe-based original equipment manufacturers. In the truck tyre original equipment market, the power unit segment, although still up 10.6 per cent, was slowed by supply problems, particularly for axle parts, affecting the production of several OEMs. The change during the quarter was mainly driven by sustained Eastern European OEM business performance and exports.
In the trailer segment, the market posted more subdued growth: 3.5 per cent year-on-year.

Michelin’s outlook for full-year 2008 is mixed. In the replacement car and truck tyre market the company reports: “It is too early in the year to conclude that the market decline observed in March in North America reflects a significant slowdown in demand triggered by an economic recession in the United States resulting in new driving patterns. In Europe, the Group expects a modest turnaround and in the emerging areas, demand should continue to trend up (3% to 6%).” The company believes the car and light commercial tyre OE market will remain flat in Europe and decline sharply in Europe. In truck tyre markets, replacement sales should grow by 10 per cent or more on the back of strong sales in Asia and South America, and in the OE sector high demand levels worldwide, excepting North America, are anticipated.