Michelin sales up, volumes down in Q1
Michelin reports having achieved Group net sales of 5.304 billion euros in the first quarter of 2012, an increase of 5.1 per cent on the same quarter last year. This growth was propelled by a 23.8 per cent rise in net sales in the company’s specialty businesses; sales of earthmover, agricultural, two-wheel and aircraft tyres, along with Michelin Travel Partner and Michelin Lifestyle, amounted to 940 million euros during the quarter. A more modest 2.9 per cent growth in net sales to 2.760 billion was witnessed in Michelin’s passenger car and light truck tyres division, while truck tyre division sales decreased 0.1 per cent year-on-year to 1.604 billion euros.
Sales volumes declined 9.6 per cent year-on-year during the quarter, an event Michelin attributes to high prior-year comparatives and ongoing dealer inventory drawdowns. A 13.8 per cent improvement was seen in price mix, however, which the tyre maker says reflects the 577 million euro impact of the 2011 price increases and the indexation clauses designed to offset higher raw materials costs and the 52 million euro impact of the improved sales mix. In all, the price mix was seen to amply offset the decline in volumes. Michelin also notes a positive 2.2 per cent currency effect, due to gains in the US dollar, the Chinese yuan and other currencies against the euro.
As touched on above, Michelin’s passenger car and truck tyre businesses delivered lacklustre results. Net passenger car and light truck tyre sales rose 2.9 per cent in the quarter, however sales volumes declined 8.9 per cent; Michelin says this was expected given the high prior-year comparatives due to the high price increases introduced as early as April 2011. Volumes were also dampened by buyer hesitation in certain large markets and by ongoing dealer destocking. Sales volumes for the truck tyre business fell 16.3 per cent, dragged down by a collapse in European demand, notably in Southern Europe. Volumes demonstrated better resistance in North America. Specialty business sales volumes grew 6.2 per cent, with sales of all associated products growing.
Reiterating its outlook for full-year 2012, Michelin confirms its objective of stable sales volumes over the full year, in a market environment that is more uncertain in Europe, resilient in North America and more vigorous in the growth regions. Capital expenditure, in a projected amount of 1.9 billion euros, will focus on the Michelin brand premium segments (such as mining tyres and 17-inch and over tyres), as well as on production capacity in new markets.
The company believes sustained price management in response to rising raw materials should amply offset their additional cost impact, which is still estimated at 300-350 million euros for the year. Lastly, Michelin reaffirms its 2012 objective of reporting a clear increase in operating income and positive free cash flow, before the impact of the sale of its former Paris headquarters.
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