Delticom Raises 2010 Forecast

Delticom has once again raised its guidance for 2010 due to a surge in demand for winter tyres leading to supply shortages. As a result of this market-wide scarcity, winter tyre prices have increased starkly across Europe. Delticom management's guidance for the 2010 financial year from November 26th has thus been overtaken by the recent developments. On the back of strong fourth quarter sales, the company should be able to grow 2010 revenues by more than +30 per cent year-on-year (previous guidance: more than +20 per cent). Due to the “very beneficial pricing environment” throughout the year and especially in the fourth quarter, profitability will be “unusually elevated” and thus significantly better than last year. Management sees a 2010 EBIT margin on the order of 11 per cent as realistically achievable (previous guidance: around 10 per cent, last year: 9.4 per cent). Depending on how the next weeks will evolve with regards to demand, stock levels and prices, margins could come in even higher than currently estimated.

Delticom notes will not be able to sustain this level of growth in 2011: “After three exceptionally successful years in a row and with 2010 helped by the aforementioned extraordinary circumstances, negative base effects are inevitable. Assuming a return to normal business next year, Delticom should continue to grow its revenues, albeit at a considerably lower rate.”

Furthermore, says Delticom, in a more balanced market, demand and supply should adjust and lead to less flurried prices. In comparison with this year’s one-off step-up in profitability, Delticom’s 2011 margins will thus most likely come back to well below 2010 levels. Despite any burdening effects in 2011, though, Delticom remains well positioned to capitalise on the longer-term trend towards online tyre retail.