Michelin 2Q Tyre Volumes Predicted to Be -18%

Assuming stable share, Michelin’s second quarter tyre sales volume is expected to be inline with analysts’ earlier estimates of a drop of 18 per cent. However, Michelin’s monthly tyre market data, which has become something of barometer in the current unstable market conditions, shows that the leading French tyre manufacture is performing better than analysts had expected. In an investor’s note entitled ‘Punctured but still rolling” Morgan Stanley described the company’s recent performance as “slightly better than our expectations, after adjusting for an average two fewer selling days across Europe.” Year-on-year growth rates remain negative, but the pace of the decline is considered to be “more on track to meet or exceed [forecasted] tyre sales to dealers.”

As a result of the fact that tyre prices are positively correlated with both volume and input costs, Morgan Stanley suggested manufacturers remain under pressure to cut prices: “Investors must prepare for a reasonable level of price ‘give back’ to struggling tyre dealers, distributors and consumers in this environment…We believe depressed volumes and the tailwinds from lower raw material that will materialize in the second half will continue to put at risk the pricing discipline – and the profitability – of the industry.”