Michelin profitability grows in H1
Even though its sales only increased 5.95 per cent during the first half of the current financial year, Michelin has managed to boost its net income a healthy 37.2 per cent during the period. The French tyre maker’s net sales in the six months to June 30 amounted to 10.71 billion euros, up from 10.11 billion a year earlier. From this total, 5.5 billion euros was generated from the sale and distribution of passenger car and light commercial vehicle tyres, 3.27 billion from truck tyres, and 1.9 billion from specialty businesses. Operating income (before non-reoccurring items) rose 35.9 per cent per cent to 1.32 billion euros and operating margin grew from 9.6 per cent to 12.3 per cent. Net income for the period increased from 971 million euros in the first half of 2011 to 1.42 billion euros during the reporting period.
Full-year sales volumes are expected to be down by three to five per cent, the tyre maker forecasts, while it expects a “clear increase” in operating income before non-recurring items. The negative effect of lower sales volumes should be mainly offset by more favourable raw material costs and a positive currency effect.
The consumer tyre segment was punctuated by growth in the original equipment sector and decline in the replacement market. Globally, OEM sales volumes rose ten per cent in the first quarter and 12 per cent in the second. Replacement market volumes dropped five per cent and four per cent respectively. The picture for Europe was overall bleak; original equipment volumes decreased four per cent in the first quarter and six per cent in the second, while replacement market volumes declined 11 per cent in both the first and second quarters. Michelin notes that European OEM sales were down “despite sustained strong growth in Russia and the rest of Eastern Europe,” which experienced a 17 per cent increase.
The truck tyre segment was down in all regions. Global OE sales volumes were one per cent lower in both the first and second quarters, while replacement market volumes dropped seven per cent in the first quarter and eight per cent in the second. In Europe, OEM sales were restricted to a modest two and three per cent decline, while in the replacement sector sales volumes plummeted 26 per cent in the first quarter and 24 per cent in the second. Michelin opines that European replacement market volumes were affected by dealer inventory drawdowns in first-half 2012 in the face of an uncertain economy and the comparison with the first half of 2011, when dealers stocked up ahead of announced price increases.
The news was mostly good in Michelin’s specialty tyres segment:
The tyre maker observes that the mining sector is continuing to expand, led by sustained demand for ore, oil and gas, and therefore the market remains tight, especially for large tyres. The original equipment market rose over the first half in mature markets, albeit to a lesser extent in Europe due to the prevailing economic uncertainty. Demand for tyres used in infrastructure projects and quarries is still growing in every market except Western Europe.
Worldwide OE demand for agricultural tyres is rising, especially in the high-powered farm machinery segment. On the other hand, the replacement market fell sharply in Europe due to the economic situation and in North America for weather reasons.
Dragged down by the lackluster economy, two-wheeler tyre sales declined in mature geographies, except North America, but continued to expand in emerging markets.
For aviation tyres, passenger load factors are continuing to improve in the commercial aviation segment, on both domestic and intercontinental routes. The cargo market declined over the period.
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